ACCA Strategic Professional · Advanced Taxation (UK) · Value added tax
Marlow Ltd sells its entire VAT-registered retail business, including the trading premises, stock and goodwill, to Ashby Ltd, which is VAT-registered and will carry on the same kind of business without a break. Marlow Ltd has opted to tax the premises. For the transfer to be treated as a transfer of a going concern (TOGC), and so outside the scope of VAT, which additional condition applies to Ashby Ltd because of the land?
Where the seller has opted to tax the land, the buyer must also have opted to tax the premises, notified HMRC by the relevant date, and told the seller in writing that the option is not disapplied. Without this the transfer is not a TOGC, and VAT is charged.
- AAshby Ltd must be connected with Marlow Ltd
- BAshby Ltd must have opted to tax the premises and notified HMRC by the relevant date, and notified Marlow Ltd that its option is not to be disappliedCorrect
- CAshby Ltd must deregister for VAT because its turnover falls below £88,000
- DAshby Ltd must pay stamp duty land tax at 5% before the transfer takes place
Explanation
Where the seller has opted to tax land included in the TOGC, the buyer must also have opted to tax and notified HMRC by the relevant date, and must tell the seller in writing that the option is not disapplied. This prevents a VAT leakage. Connection between the parties and deregistration are not conditions, and SDLT is a separate tax with no bearing on TOGC status.
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