18 Transfer of a business as a going concern explained
When a business is sold or moved as a going concern, certain VAT rules may apply that affect how the sale is taxed. This explainer breaks down what TOGC means, who is affected, and practical next steps for different parties, with plain-language definitions of technical terms.
What is a transfer of a business as a going concern (TOGC)?
A TOGC is a way of selling a business or part of it so that the sale is not treated as a taxable supply for VAT (Value Added Tax) purposes, provided specific conditions are met. In short, if you transfer the assets that make up a business and keep operating the same business, VAT may not be charged on those assets. The rules are set out in official guidance and must be followed by office holders (official receivers or administrators) when selling a business.
Key facts that matter in TOGC cases
TOGC is not automatic. It depends on meeting all conditions in the rules. The main idea is to treat the sale as a single transaction for the purpose of transferring the business as a going concern, not as a supply of goods or services. If the conditions are not met, VAT may be charged on the transfer. The guidance cited is from HMRC’s insolvency practitioner handbook.
Who is affected by TOGC rules
Potential buyers, sellers, and official insolvency practitioners are the primary groups affected. If you are selling a business or part of it, TOGC could mean no VAT is charged on the transferred assets if the conditions are met. If you are an office holder managing the sale, you must apply the rules correctly. VAT treatment also impacts buyers who may avoid paying VAT on the transfer, subject to compliance with the conditions.
Practical next steps for affected parties
For sellers and buyers: check that the transfer covers the same business or activity and that the transferee continues the same business activity without introducing new VATable supplies that would break the TOGC conditions. For office holders: follow the specific paragraphs in the guidance (paragraph 1.4 and paragraph 2.2) to determine eligibility. Consider consulting a VAT specialist or insolvency practitioner to ensure the transfer is treated correctly and to avoid unintended VAT charges.
Limits and questions to consider
TOGC rules are precise and require strict adherence. If any condition is missing, the transfer might be treated as a taxable supply. If you are unsure whether conditions are met, seek formal guidance. The source document is HMRC’s Insolvency Practitioner’s Handbook, section 18, which outlines the requirements and application process for TOGC transfers.
Which sources did Setup in Bahrain review?
Setup in Bahrain reviewed the following source material before preparing this explanatory article.
The links remain visible so readers can inspect the evidence, compare dates and context, and confirm current requirements with the relevant authority.
- gov.uk — evidence source reviewed for this article.
Information and responsibility notice: This article is general information based on the cited material available when published. It is not legal, tax, immigration, medical, financial, banking, or investment advice; it does not create a professional-client relationship; and it is not a guarantee of outcome, availability, accuracy, or eligibility. Rules, schedules, prices, and third-party information can change. Confirm material decisions with the relevant authority and an appropriately qualified adviser before acting.