I have just sold my retail business after nine years, along with the transfer of the lease.
I know the sale is a TOGC which I'm ok with.
I used an agent to find a buyer for the business (£5k + VAT) and my solicitor has invoiced me for his services too (5k + VAT).
I'm now informed that because no profit was made last year I didn't pay any tax, therefore I'm unable to claim the VAT on these two services.
I didn't realise these two factors were linked?
Even If I misunderstood what I was being told, apparantly these two services are specified as exempt in the revenue guidlines relating to the sale of TOGC.
I'm not seeing the link between not making a profit and VAT on the fee's related to a sale which is nothing to do really with the TOGC.
You need to talk with your accountant about this (I assume that you are using a qualified accountant) who may end up seeking advice from a specialist tax advisor so best to clear with them in advance that the advice will cost less than the amount that you are losing out by (which would seem to be a £2k VAT refund / reduction).
When Tim (Don Tax) or one of the other tax experts such as Trueman Brown logs in they may have some better advice as this is more down their street than mine.
Just keep your head out of the oven for a bit and someone better experienced with this sort of scenario will be along within the next 24 hours with some better advice (many site posters only visit during office hours).
You could also try posting the same question over on Accountingweb although that can feel a little like playing hopscotch, blindfolded in a minefield for non accountants who post over there.
Keep your eye on both responses and don't forget to keep us informed of any further info that you get off site.
kind regards,
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.
Hi Shaun, I think this came in because sellers were going walkabout after receiving the proceeds. The couple of times premises have been sold under my watch, I've brought in an ex VAT officer, now in practice. Thanks for the vote of confidence but too many imponderables for my little GP setup. I agree though, the profit factor seems a red herring, but I'd be interested to know if that is relevant.
The services of selling the business are made in the course of the business being sold, therefore input tax is recoverable. If you have already deregistered for VAT, then you can use form VAT 427 to recover the VAT - http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=izvOKnV2M2Y&formId=1015
2.6 Deduction of VAT on expenses incurred on the transfer
Although there is no supply for VAT purposes where there is a TOGC, this does not prevent the deduction, subject to the usual rules, of input tax on related expenses (for example solicitors fees and estate agents costs). There is, however, a distinction between the extent to which the seller and the purchaser can deduct such input tax.
