VAT if you sell your business

tiemadmin • 20 March 2025

When selling a business, the Transfer of a Business as a Going Concern (TOGC) rules can allow the transaction to be VAT-free if key conditions are met. This prevents unnecessary VAT charges and ensures compliance with HMRC. Learn how TOGC applies to your sale.

A TOGC is defined as "neither a supply of goods nor a supply of services” meaning it falls outside the scope of VAT and no VAT would be charged on the sale.

For the TOGC rules to apply, all of the following conditions must be satisfied:

  • The assets must be sold as part of a business that is operating as a "going concern." This means the business must be actively running, not just an 'inert aggregation of assets'.
  • The purchaser must intend to use the assets to carry on the same type of business as the seller.
  • If the seller is a taxable person, the purchaser must either already be a taxable person or become one as a result of the transfer.
  • If only part of the business is sold, it must be capable of operating independently.
  • There must not be a series of immediately consecutive transfers.
  • Additional conditions apply to transactions involving land.

The TOGC rules can be complex, and both the seller and buyer need to ensure they comply with all the conditions. These rules are mandatory, so it's crucial to establish whether a sale qualifies as a TOGC from the outset. For example, if VAT is charged incorrectly, the buyer cannot recover it from HMRC and would need to seek reimbursement from the seller.

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