Forum Categories › VAT ON PROPERTY TRANSACTIONS › Claiming VAT on professional fees for sale of commercial property as a TOGC › Reply To: Claiming VAT on professional fees for sale of commercial property as a TOGC
Hi – there’s two aspects to your question! I’ve included a number of links below – the majority are to HMRC internal guidance. This is written primarily for HMRC staff, so where the text says “you”, it actually means “them”! But it shows the processes and considerations which they should be following.
TOGC – I’m assuming that all of the conditions for the transaction to be treated as a TOGC were met, and so no VAT was declared on the income that you received.
Under VAT law, a TOGC is deemed to be neither a supply of goods not services (see https://www.gov.uk/hmrc-internal-manuals/vat-transfer-of-a-going-concern/vtogc1100). This means that the VAT incurred in connection with the transfer is not attributable to the transfer, but is instead regarded as a general business expense (see https://www.gov.uk/hmrc-internal-manuals/vat-transfer-of-a-going-concern/vtogc4200). Therefore if your business was entitled to recover VAT in full on it’s normal business expenses, it will be entitled to reclaim the VAT on costs relating to the TOGC.
Deregistration – Does your business make any other taxable supplies?
If not, then you must notify HMRC that taxable activity has ceased (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg03000). There is a time limit of 30 days from the date at which you ceased to be eligible for registration (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg06000), and you could be liable to a penalty if this isn’t met. Arguably your taxable activity would have ceased at the point of the TOGC. However HMRC can then defer deregistration for up to 6 months where there are assets to be sold or costs that have yet to be billed (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg13000) – this should allow most remaining VAT declarations to be made on the normal returns, rather than via a VAT427.
If you have now missed that deadline, you should notify HMRC straight away, and explain that you have been trying unsuccessfully to contact them for clarification. Any penalty for late notification would be issued under section 69 of the VAT Act 1994 (see https://www.legislation.gov.uk/ukpga/1994/23/section/69), subsection 8 of which allows for the penalty to be waived if HMRC are satisfied that there is a “reasonable excuse” for the late notification.
If your business does still make other taxable supplies (this might include the sale of goods if your business had any assets that were not transferred as part of the TOGC and will now be sold separately), but you know that the value of those supplies will fall below the VAT deregistration threshold, you can voluntarily deregister (see https://www.gov.uk/hmrc-internal-manuals/vat-deregistration/vatdreg02050). As this is done by choice, there is in practice no time limit. But you must continue to charge VAT on any taxable supplies that you make prior to the effective date of your deregistration.