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ACCA Strategic Professional · Advanced Taxation (UK) · Value added tax

Alder sells his unincorporated letting business, which consists of a let commercial building on which he opted to tax, to Birch, who is VAT-registered and will continue the letting business. Birch has also opted to tax the property and has notified HMRC. Which statement is correct?

The sale is a transfer of a going concern and is outside the scope of VAT. The letting business continues under a VAT-registered buyer, and for opted property the buyer has also opted to tax and notified HMRC. All conditions are met, so no VAT is charged.

  1. AThe sale is a transfer of a going concern and is outside the scope of VATCorrect
  2. BThe sale is standard-rated at 20% because property is always taxable
  3. CThe sale is exempt because the property is let
  4. DThe sale is zero-rated because the business continues

Explanation

A transfer of a going concern is outside the scope of VAT where the business is transferred as a going concern to a taxable person who will carry on the same kind of business. For land that has been opted to tax, the buyer must also have opted to tax and notified HMRC by the relevant date. These conditions are met, so no VAT is charged. Exemption and zero-rating are wrong labels for such a transfer.

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