Glossary · UK
What is Transfer of Going Concern (TOGC)?
A VAT rule treating the sale of a business as outside the scope of VAT, avoiding a large VAT charge on the transaction.
Full Definition
A Transfer of Going Concern (TOGC) is a VAT provision (under VATA 1994 and SI 1995/1268) that treats the sale of a business, or a separately identifiable part of a business, as neither a supply of goods nor a supply of services for VAT purposes. This means no VAT is charged on the transaction price. The TOGC rules apply automatically when all conditions are met: (1) the assets sold must form a business or part of a business capable of separate operation; (2) the purchaser must be registered for VAT (or become registered as a result of the transfer); (3) the purchaser must intend to use the assets to carry on the same kind of business; (4) where the business is VAT-exempt (e.g. certain property businesses), the purchaser must also have opted to tax the property if the seller had done so. TOGCs avoid cash flow issues that would arise if VAT had to be charged, paid, and subsequently reclaimed by the purchaser. Where a TOGC applies, the seller does not charge VAT and the buyer cannot reclaim any VAT (none having been charged). Misclassifying a transaction as a TOGC when it is not can result in the seller having an underpaid VAT liability. HMRC guidance on TOGCs is in VAT Notice 700/9.