When a business is sold as a going concern, the sale is treated for VAT purposes as neither a supply of goods nor a supply of services, so no VAT is charged. This is the transfer of a going concern, or TOGC. The rules are compulsory. They apply only if the buyer takes over a working business, carries on the same kind of business without a significant break, and is VAT registered or must be. Property that the seller has opted to tax brings extra conditions for the buyer.
What is a transfer of a going concern?
Normally, when a VAT registered business sells its assets, VAT is due on the sale at the appropriate rate. HMRC’s VAT Notice 700/9 sets out an exception: if the assets are sold as part of a business that is a going concern, and certain conditions are met, no supply takes place for VAT purposes and no VAT is chargeable.
The rule saves the buyer from funding VAT on the price and protects HMRC from a seller charging VAT that the buyer reclaims but the seller never pays over.
Can the seller and buyer choose whether TOGC applies?
No. HMRC is clear that the TOGC rules are compulsory and you cannot opt out. If the conditions are met, the seller must not charge VAT on the assets transferred. If they are not met, the sale takes its normal VAT treatment.
What are the conditions for a TOGC?
All of the following must apply:
- Assets sold as a business. Assets such as stock, goodwill, premises and fixtures must be sold as part of the going concern, leaving the buyer with a business that can be operated as such.
- Same kind of business. The buyer must intend to use the assets to carry on the same kind of business as the seller. It need not be identical, and a buyer who plans to change direction later can still qualify if they continue the old business at first.
- VAT registration. Where the seller is a taxable person, the buyer must already be one or become one as a result of the transfer. A voluntary registration must be in place at the time of the transaction; applying afterwards for a backdated registration does not work.
- Part of a business. If only part of the business is sold, that part must be capable of operating on its own.
- No immediate onward sale. There must not be a series of immediately consecutive transfers. If A sells to B and B immediately sells on to C, none of the sales is a TOGC.
Does a short closure break the going concern?
HMRC says there must be no significant break in the normal trading pattern before or immediately after the transfer. A short closure for redecoration will not usually prevent TOGC treatment, and a seasonal business that is closed for the off season when sold has not necessarily broken its trade.
What if the buyer is not VAT registered?
If the seller is registered and the buyer neither is registered nor must register, the conditions fail and the seller should charge VAT in the normal way. This can catch a buyer who expects turnover to fall below the VAT registration threshold, or a purchase from a seller who was only voluntarily registered. Buyers should apply early.
Is selling shares in a company a TOGC?
No. When a company changes hands through a sale of its shares, the assets stay owned by the company. There is no transfer of assets, so the TOGC rules have nothing to apply to.
How does the option to tax affect a TOGC of property?
Property brings extra conditions. If the seller has opted to tax the land or building, or is selling the freehold of a new commercial building under three years old, the property can only be included in the TOGC if the buyer:
- has opted to tax the property and notified HMRC in writing no later than the relevant date; and
- has notified the seller, by the same date, that their option will not be disapplied under the avoidance rule in VATA 1994, Schedule 10, paragraph 12.
The relevant date is the time of supply. That is normally the date of transfer, but a deposit can create an earlier tax point. A deposit held by an independent stakeholder does not create a tax point until it is released to the seller, whereas one paid to the seller’s agent can.
If the buyer misses either step, the property falls outside the TOGC and VAT is charged on it, although the other business assets may still qualify. The seller is responsible for getting the treatment right, so HMRC suggests the seller may ask for evidence of the buyer’s option, such as a copy of the notification letter, and get the buyer’s statement in writing. Where the property is a capital item, check whether adjustments pass to the buyer under the capital goods scheme.
What happens if VAT is charged wrongly, or not charged when it should be?
If a seller charges VAT on a sale that was a TOGC, the buyer cannot reclaim it as input tax, because there was no taxable supply. The seller has to cancel the invoice and refund the VAT, normally with a credit note.
If the sale is treated as a TOGC when it was not, VAT should have been charged. HMRC states that incorrect treatment can lead to corrective action, which may attract penalties and interest. Because the seller carries responsibility for the treatment, it is sensible for the sale contract to say who bears the VAT if HMRC takes a different view.
Can you ask HMRC to confirm the treatment?
HMRC will give further advice where a proposed TOGC has an unusual feature. The request should normally come from the seller, in writing, with all the relevant facts and a clear explanation of what is uncertain. HMRC does not give clearances in every case, so check its non statutory clearance guidance first.
What else changes after a TOGC?
- VAT number. The buyer can apply to take over the seller’s VAT registration number online or on form VAT68. If they do, the buyer becomes liable for the seller’s outstanding VAT debts.
- Records. The seller keeps the business records unless the VAT number transfers, but must give the buyer the information needed to meet their VAT obligations.
- Costs of the sale. VAT on legal and agent fees can still be recoverable under the normal rules, even though the transfer itself is not a supply.
How can you protect yourself against an HMRC challenge?
HMRC can question TOGC treatment in a later VAT enquiry, and defending it takes accountant time. Solar Protect tax investigation insurance covers up to £100,000 of your accountant’s fees with no excess, including VAT disputes. If you are planning a sale or purchase, get a quote before the deal completes.
Reviewed by Matthew Bartlett, Director, Solar Protect. Last reviewed 29 September 2026. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.