I've been asked by a client if they will need to charge VAT on the sale of goodwill when they incorporate their partnership into a ltd company. I'm sure it's VAT exempt as its a Transfer of a Going Concern (TOGC) and the two businesses are both the same trade and VAT Registered.
What I wanted to check is 1.) is my above assumption correct, and 2.) will they need to charge VAT when the sell the business one day in the future or is this exempt too under the TOGC rules.
my understanding is different but amounts to the same.
Business A is a partnership sells to business B limited company. Both VAT registered.
VAT should be charged on the goodwill but reclaimable as both businesses are VAT registered.
My understanding is that where such occurs HMRC treat the transaction as exempt even though it's not as one would simply be passing the same money in and out with HMRC making nothing on the deal.
Overall effect is the same except that there was no exemption.
Problem now is that I've no idea where I read the above and it's going to irritate me until I find it...
Now where to start? HMRC website or Accountingweb???
Talk in a bit,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Specifically at VAT on the sale of a going concern which contains the following :
If the business you're taking over is a transfer of a going concern and is VAT-registered, and you are already VAT-registered or you need to be registered on the day of the transfer, you won't be charged VAT on the sale and there won't be any for you to reclaim.
If the business you're taking over is VAT-registered, but you aren't VAT-registered on the day of the transfer and don't need to be and you don't chose to register voluntarily, you will be charged VAT on the sale.
The above needs to be read in the context of the whole page but the highlighted line seems to answer your specific question. (Goodwill is spoken about in text not reproduced above).
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
