VAT on purchasing a business?
Discussion
Hi everyone,
We are currently purchasing a business with another person and it has been mentioned by one of them that we need to pay VAT on the purchase.
I've never come across this before, I was under the impression that purchasing businesses was not VATable.
Does anyone have any experience of this?
My initial reaction is the seller being underhand and trying to get an extra 20%, HMRC will not reimburse VAT if it's not a VAt qualifying purchase where it hasn't been paid.
What do you think.
Four people buying a going concern. Going concern is VAT registered. Newco will be VAT registered.
We are currently purchasing a business with another person and it has been mentioned by one of them that we need to pay VAT on the purchase.
I've never come across this before, I was under the impression that purchasing businesses was not VATable.
Does anyone have any experience of this?
My initial reaction is the seller being underhand and trying to get an extra 20%, HMRC will not reimburse VAT if it's not a VAt qualifying purchase where it hasn't been paid.
What do you think.
Four people buying a going concern. Going concern is VAT registered. Newco will be VAT registered.
Share sale - no VAT.
The sale of business assets would generally be subject to VAT at 20%. However, when the whole or part of a business is sold to a buyer who intends to use the assets to continue in the same trade, the business can be transferred as a going concern (TOGC) - so neither a supply of goods nor services and therefore outside the scope of VAT.
Conditions must be met to qualify for TOGC and they include,
The way that the buyer uses the assets.
VAT registration status of the buyer.
The operational status and trading history of the buyer.
Or to put it another way, you need to get paid professional advice.
The sale of business assets would generally be subject to VAT at 20%. However, when the whole or part of a business is sold to a buyer who intends to use the assets to continue in the same trade, the business can be transferred as a going concern (TOGC) - so neither a supply of goods nor services and therefore outside the scope of VAT.
Conditions must be met to qualify for TOGC and they include,
The way that the buyer uses the assets.
VAT registration status of the buyer.
The operational status and trading history of the buyer.
Or to put it another way, you need to get paid professional advice.
Panamax said:
Just to add, VAT treatment of property assets may vary. This can typically be seen if VAT has been charged on rent charged to tenant(s) or if a lot of building work has been carried out and the owner wanted to reclaim the VAT paid to the builder.
Okay, there is VAT on the rent. Something I hadn't come across before this purchase.We are buying the business (Name, equipment, etc) off person A but entering into a new lease with associated break clauses etc with the landlord.
Hai, we had a similar situation when buying a café. If it’s a going concern and both buyer and seller are VAT registered, no VAT should apply on the sale. But VAT can still apply on rent if the landlord opted to tax the property , sounds like that’s what’s happening here. Best to check with an accountant just to be safe.
WillamMilli said:
Hai, we had a similar situation when buying a café. If it’s a going concern and both buyer and seller are VAT registered, no VAT should apply on the sale. But VAT can still apply on rent if the landlord opted to tax the property , sounds like that’s what’s happening here. Best to check with an accountant just to be safe.
It was 9 months ago, possibly a bit late 
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