TOGC VAT Saving Calculator
A Transfer of a Going Concern (TOGC) is outside the scope of VAT — no VAT is charged on the business sale. This avoids the buyer having a large VAT cash flow cost and the seller an accounting liability.
Frequently Asked Questions
What is a Transfer of a Going Concern (TOGC)?
A TOGC is the sale of a business (or part of a business) as a going concern. Under UK VAT law, a TOGC is outside the scope of VAT — no VAT is charged on the sale price, even if assets like land, stock, or equipment would normally attract VAT.
What are the conditions for TOGC treatment?
For TOGC treatment: (1) the assets must constitute a business or part of a business capable of separate operation; (2) the buyer must continue the same kind of business; (3) there should be no significant break in trading; and (4) if OTT property is included, the buyer must opt to tax before or at completion.
Does TOGC apply to asset sales or share sales?
TOGC applies to asset sales only. Share sales are outside the scope of VAT automatically (shares are not goods or services), so TOGC is irrelevant to a share purchase. TOGC is specifically about the transfer of business assets.
What is the Option to Tax issue in TOGC?
If property subject to the Option to Tax (OTT) is included in the sale, TOGC treatment requires the buyer to have OTT in place before the sale completes. Otherwise, the property element falls outside TOGC and VAT must be charged on it.
What happens if TOGC conditions are not met?
If TOGC conditions are not satisfied, the seller must charge VAT at the standard rate on taxable supplies (assets) included in the sale. The buyer then needs to recover the VAT through their VAT return — creating a cash flow cost and potential irrecoverable VAT for partly exempt buyers.
Does TOGC apply to a partial business sale?
Yes. A TOGC can apply to the transfer of a discrete part of a business — for example, one of several divisions being sold as a standalone operating unit. The part must be capable of operating independently.
Is goodwill included in a TOGC?
Goodwill transferred as part of a going concern business sale is treated as part of the TOGC and is outside the scope of VAT. Standalone goodwill sales (not part of a going concern transfer) could be taxable.
Does TOGC apply to franchise transfers?
TOGC can apply to franchise business transfers where the franchisee sells their operating business as a going concern to another franchisee. The franchisor's consent to continue using the brand doesn't prevent TOGC treatment.
What are the VAT obligations after a TOGC?
The buyer takes over the business's VAT history for the transferred assets. The seller remains liable for any VAT due on pre-TOGC supplies. The buyer should notify HMRC of the TOGC on their first post-sale VAT return. Detailed records of assets transferred should be maintained.
Does TOGC apply to a buy-out where part of a company is sold?
If a separately identifiable part of a business is sold — such as a division, department, or geographical territory — TOGC can apply to that part, even if the parent company retains the remainder of its activities.
Can TOGC be applied to property investment businesses?
A property investment business (owning and renting commercial property) can be transferred as a TOGC if the buyer continues the rental business. This is a common structure for commercial property portfolio sales. OTT conditions are critical.
What records must be kept for a TOGC?
Retain: sale agreement identifying assets transferred, evidence that buyer continued the business, OTT notifications (if applicable), buyer's VAT registration details, and TOGC notification on the VAT return. HMRC may request these during an enquiry.