HMRC Brief 11 (2016): VAT and the transfer of a going concern

HMRC Brief 11 (2016)

HMRC have released Brief 11 (2016) outlining the changes to their policy on the transfer of a going concern

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This Brief sets out HMRC’s position following the Upper Tribunal (UT) decision in Intelligent Managed Services Limited (IMSL), which was a case concerning VAT groups and transfers of a going concern (TOGC). Where TOGC conditions are met, the transfer of the trade and assets of a business is de-supplied from VAT and no VAT is due. HMRC always took the view that if the only customer(s) of a business was another VAT group member(s) or would be another VAT group member(s) after transfer then there was no business capable of transfer, or the business would not continue post transfer. The UT disagreed, concluding HMRC were taking the statutory fiction of VAT grouping too far. This Brief confirms changes to HMRC’s policy following this decision.

The Brief confirms that following the IMSL decision, HMRC accepts that a business transferred into a VAT group is a TOGC at the first stage if:

  • That company intends to continue to use the transferred assets to operate the same kind of business in providing services to other group members, and
  • Those other group members use the services to make supplies outside of the group. This second condition may be the harder one to evidence.

As regards transfers from a group, HMRC have also changed their policy. Now where, were it not for the VAT grouping rules, a business exists, the normal TOGC rules apply to transfers out of a VAT group


For further information please contact :

Graham Mckay

Karen Killington  

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