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11:06 on Saturday
26 February 2005

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TOGC - Sale of Commercial Property


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A Budget change, allegedly targeted at anti-avoidance, has a much wider application.

Brief details are in C&E Budget Notice 30/04, which is still available on their web site. I have to say that the rules are complex, and C&E have more recently published their Business Brief 12/04.

The situation will arise where a commercial property, which is opted to tax, is sold as part of a business. Ordinarily, a TOGC (Transfer of a Going Concern) will occur only where the purchaser also opts to tax.

If the purchaser fails to opt, then there is no TOGC, and output tax is chargeable on the sale. (I am assuming the other TOGC conditions are fulfilled.) However, an option can be disapplied where the property is to be put to exempt use following its transfer, or where the property is to be converted for residential or charitable use.

The new rules will affect those situations where there is expected exempt use following transfer, and the property will become a Capital Item, i.e., is valued at over 250,000.

The transferee is required to notify the transferor, prior to the transfer, that the property will not become an exempt sale, otherwise the TOGC conditions are not fulfilled, and the sale will attract VAT at the standard rate, which will not be recoverable. T

he new rules will also affect those situations where a sale of a property, separate from a business, is followed by another immediate sale. Again, an option to tax may be disapplied in such circumstances.

The Business Brief refers to the possibility of obtaining a pre-transaction ruling, or clearance, from C&E. This may well be advisable in a complex or doubtful case, to provide some certainty to all parties.

[Refs; VAT Act 1994, Sch 10, para 2; SI 1995/1268, art 5.]

September 2004

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