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Good evening all, I've got a bit of a query regarding VAT and sale of a business under TOGC.
I'll try and keep it as brief as possible as the subject seems to be a bit of a minefield on the HMRC site.
The business concerned is a Coal Merchants, and the sale of the business only involves a vehicle (owned for considerable length of time), stock in the form of coal, etc, and a current customer list.
No premises is involved.
The business is being taken over with no break in trading, the seller is VAT registered with a turnover in excess of £110,000. As I understand it the buyer must also register for VAT if not already registered.
The main queries are regarding the understanding of VAT on the sale of the business.
HMRC guidance states:
'The TOGC provisions are intended to simplify accounting for VAT when a business changes hands. They have the following main purposes:
- to relieve the buyer of a business from the burden of funding any VAT on the purchase. Thereby helping businesses by improving their cash flow and avoiding the need to separately value assets which may be liable at different rates or are exempt and which have been sold as a whole, and
- to protect government revenue by removing a charge to tax and entitlement to input tax where the output tax may not be paid to HMRC. For example, where a business charges tax, which is claimed as input tax by the new business but never declared or paid by the old business'
So my understanding of this, and the rest of the guidance, in relation to the sale of this business is that the seller does not include VAT in the sales invoice for the business assets/stock when selling.
Is my understanding of the situation correct?
It appears to make sense that the seller would not charge VAT under TOGC, making none payable to HMRC, and that the buyer would not be able to reclaim VAT on the purchase as none was charged.
Then we come to the VAT Return for the quarter relevent to the sale of the business:
Presumably (if the sale of the business was the only transaction for that quarter) the seller would declare £nil on VAT sales, owing nothing to HMRC for that quarter?
Does that sound correct?
I hope I haven't made that too overcomplicated, but having read the online guidance on TOGC's my head is about ready to explode....
With thanks,
Ade.
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