What Is TOGC? Conditions, Property Rules, and TUPE

A Transfer of a Going Concern, or TOGC, is a set of VAT rules for business transfers that takes a qualifying sale outside the scope of VAT altogether, so no VAT is charged on the purchase price. The treatment is not optional. When the conditions are met it is mandatory, and when they aren’t, the parties cannot elect into it.¹ The practical benefit is that the buyer avoids paying VAT upfront on what can be a substantial acquisition, sparing the cash flow hit of waiting for HMRC to process an input tax reclaim. Get it wrong in either direction and there are real financial consequences, so both sides need to confirm the conditions before completion.

The Six Conditions That Must All Be Met

All six conditions below must be satisfied. Miss one and the sale becomes a standard taxable supply, with VAT chargeable on the full price. The conditions come from VAT Notice 700/9 and the VAT (Special Provisions) Order 1995.¹

The assets, including stock, machinery, goodwill, premises and fixtures, must be sold as part of a going concern rather than piecemeal.
The buyer must intend to carry on the same kind of business as the seller. It need not be identical, but the buyer must end up with a functioning business rather than a pile of equipment.
If the seller is VAT-registered, the buyer must be registered too, or become required to register as a result of the transfer.
Where the sale includes land or buildings that would be standard-rated, the buyer must opt to tax the property and notify HMRC by the relevant date.
If only part of the business is being sold, that part must be capable of operating independently.
There must be no series of immediately consecutive transfers of the same business.

The business also has to be a genuine going concern at the moment of transfer. No significant break in trading before or after the handover. A seller who shuts up shop weeks before completion and hands over dormant assets is selling property, not a business. HMRC looks for continuity.

Getting the VAT Registration Right

The seller only needs to be a taxable person when the TOGC happens. There is no minimum period of prior registration.²

The buyer’s position is more demanding. They must be VAT-registered, required to register, or accepted for voluntary registration by the date of transfer. Under section 49 of the Value Added Tax Act 1994, the buyer is treated as having carried on the seller’s business before the transfer for the purpose of determining registration liability.³ The seller’s historical turnover counts toward the buyer’s threshold, so if that turnover exceeds £90,000, the buyer is compulsorily registrable.⁴

Timing catches people out. Registration must be in place by the date the assets change hands. A pending application is not enough. If registration hasn’t come through by completion, the transaction fails the test and VAT becomes chargeable on the whole price. Buyers who are not already registered should apply well in advance or arrange voluntary registration to take effect on the transfer date.

Selling Only Part of a Business

You do not have to sell the whole business. A branch, division, or distinct operation can qualify, provided that part can stand on its own as an independent enterprise.¹

The test is whether the transferred assets have been used to make supplies, not merely to support overheads. An in-house function that only serves the rest of the company internally will not count. A property rental business is a common example: if you own several let properties and sell one with the tenant in place, that single let property can qualify as a TOGC of a property rental business.

When only part of the business transfers, the buyer looks at the turnover of that part alone to determine whether they need to be VAT-registered. The seller’s total group turnover is not the relevant figure.

Commercial Property Sales and the Option to Tax

Property is where TOGC treatment most often breaks down, because an extra condition applies. If the sale includes land or buildings on which the seller has opted to tax (making their supplies of that property standard-rated rather than exempt), the buyer must also opt to tax the same property and notify HMRC by the “relevant date.”¹

Article 5(3) of the VAT (Special Provisions) Order 1995 defines the relevant date as the date the grant would have been treated as made, or the earliest such date where there is more than one.⁵ In most straightforward sales this is the completion date. The buyer must also confirm to the seller, by the same date, that their option to tax has not been disapplied by the anti-avoidance rules.

Opting to tax is itself a serious commitment. Once you opt, all supplies you make of your interest in that land or building become standard-rated, and you can recover input VAT on related costs.⁶ If the buyer’s plans involve making exempt supplies from the property, opting could create an irrecoverable VAT cost elsewhere in the business. Don’t treat it as a formality.

Anti-Avoidance Traps on Property

Schedule 10 of the Value Added Tax Act 1994 can automatically disapply an option to tax in certain circumstances. The developer scenario is the one that catches most parties out. If the person making the grant is a developer of the land and, at the time the grant was made, intended or expected the property to become exempt land, the option does not make the supply taxable.⁷

In a TOGC, this matters because the buyer must confirm their option has not been disapplied. If the buyer plans to convert commercial property into residential dwellings (which are exempt from VAT), the anti-avoidance rules may block the option and, with it, the TOGC treatment. VAT then falls due on the purchase price. Parties often discover this only after contracts have been exchanged.

Solicitors handling commercial property TOGCs build these checks into due diligence. If there is any question about whether the buyer’s intended use could trigger Schedule 10, obtaining formal advice, or a ruling, before completion is cheaper than unwinding the VAT afterward.

What Happens When You Get the Treatment Wrong

Because the rules are compulsory in both directions, mistakes hurt whichever way they run.

If VAT is charged on a transaction that should have been a TOGC, the buyer cannot reclaim it as input tax because there was no taxable supply. The seller must cancel any VAT invoice and refund the VAT, typically by issuing a credit note.¹ Simple on paper. In practice, the buyer has paid money they cannot recover through HMRC and must pursue the seller directly.

The reverse error is worse. If the parties treat a sale as a TOGC when it doesn’t qualify, the seller should have charged VAT and didn’t. HMRC can assess the seller for the VAT that should have been accounted for, plus interest, and incorrect treatment can attract a penalty. The buyer has no VAT invoice to support any input tax claim, so even where recovery would be possible in principle, the documentation isn’t there until the seller issues a proper invoice and accounts for the tax.

HMRC’s guidance is blunt: establishing whether a sale qualifies from the outset is critical because corrective action may attract both a penalty and interest.¹

Transferring the Seller’s VAT Number

When a business changes hands as a TOGC, buyer and seller can agree to transfer the seller’s existing VAT registration number to the buyer. This is done using form VAT 68, which both parties sign. The buyer must also submit a fresh VAT 1 form (and VAT 2 if the buyer is a partnership) to cover the change of ownership.⁸

Transferring the number is not compulsory. The buyer can apply for a new one while the seller cancels theirs. Keeping the existing number simplifies matters with customers and suppliers who already have it on file, and avoids any gap while a fresh application processes.

Submit the form as soon as the business is transferred and before the seller asks HMRC to cancel their registration. If the buyer wants to keep the seller’s accountant, they must tell HMRC in writing within 21 days of signing the form.⁹

Employees Transfer Under TUPE

If staff come with the business, the Transfer of Undertakings (Protection of Employment) regulations apply automatically. The new employer takes over existing contracts, including terms and conditions, holiday entitlement, and continuous employment dates. An employee’s start date is unchanged, so their length of service carries over.¹⁰

The buyer also inherits liability for the previous employer’s failures to observe employee rights. A discrimination claim that arose before the transfer can be pursued against the new employer. Buyers who don’t factor this into due diligence can find themselves responsible for employment liabilities they never knew about. Review employee records, outstanding grievances, and pending tribunal claims before completion.

Practical Steps Before Completion

The paperwork side of a TOGC is less about forms and more about sequencing decisions in the right order. A few things that regularly catch parties out:

Agree TOGC status before contracts are exchanged. Putting a TOGC clause in the sale agreement and then finding a condition isn’t met at completion creates a VAT liability neither side budgeted for.
Get the buyer’s VAT registration finalised in time. A pending application will not do; registration must be effective by the transfer date.
Handle the option to tax on any property. Where the seller has opted, the buyer’s own option must be notified to HMRC and confirmed to the seller by the relevant date.
Transfer the business records. VAT records, invoices, and input tax documentation for the business should pass to the buyer, who inherits the seller’s VAT accounting history and may need to show it to HMRC.
Run the anti-avoidance analysis. If the deal involves commercial property and the buyer intends any exempt use, get the Schedule 10 position tested before exchange.

The VAT at stake in a business sale is often a six- or seven-figure number. The cost of specialist advice on whether the conditions are met is trivial next to that, and structuring the deal correctly at the outset is far easier than arguing about it with HMRC afterward.

1
GOV.UK. Transfer a Business as a Going Concern (VAT Notice 700/9)
2
HM Revenue & Customs. VAT Registration Manual – Transfers of Going Concerns (TOGC): VAT Registration: Requirements
3
Legislation.gov.uk. Value Added Tax Act 1994 – Section 49
4
GOV.UK. How VAT Works: VAT Thresholds
5
HM Revenue & Customs. Land and Property: Notification – Relevant Date; Option to Tax
6
HM Revenue & Customs. Opting to Tax Land and Buildings (VAT Notice 742A)
7
Legislation.gov.uk. Value Added Tax Act 1994 – Schedule 10 – Paragraph 12
8
GOV.UK. Register for VAT – Transfer Your VAT Registration
9
HM Revenue and Customs. VAT 68 – Transfer of a Business as a Going Concern: Request for Transfer of a Registration Number
10
GOV.UK. Business Transfers, Takeovers and TUPE: Transfers of Employment Contracts