Selling Your Business - the VAT Implications

Newsletter issue - August 08.

When you sell the shares in your own company there are few VAT implications. The VAT registration will normally go with the company, as it is the company that is VAT registered not you as the owner of that company. If you are a director of the company you will want to resign, tell Companies House and tell the HMRC VAT office you are no longer a director.

Where you sell the assets and trade of your business, either out of your company or as a sole trader or partnership business, the transfer may qualify as a transfer of a going concern (TOGC). If TOGC applies you don't charge VAT on the transfer of the assets. The conditions for a TOGC to apply for VAT purposes are:

the entire business is transferred as a going concern; or
if only a part of a business is being sold, that part must be capable of separate operation; and
the purchaser must use the assets in the same kind of business, which may be as part of an existing business; and
the purchaser should already be VAT registered, or becomes VAT registered as a result of acquiring the business.

Your business need not be profitable at the time of transfer. The TOGC treatment can apply to a trading business sold on by a liquidator or by an administrative receiver.

If the conditions for TOGC are not met and you are VAT registered, you must charge VAT on the sale of each of the assets. Certain types of real property will be zero-rated or exempt from VAT, so ask us for advice in advance if the sale includes land or buildings.