rcb 11/2016 - togc
TRANSCRIPT
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GRT100456
Summary As a result of HMRC's previous
policy, some businesses will have
paid VAT on the acquisition of
businesses. Where the acquisition
has included land assets, it is
possible that Stamp Duty Land Tax
(SDLT) will also have been paid on
the VAT inclusive consideration.
Businesses that have either overpaid
VAT or SDLT (or both) may have a
valid claim against HMRC.
Revenue & Customs Brief 11/2016
acknowledges that HMRC's
interpretation of the law and
previous policy were incorrect.
The Brief explains HMRC's new
policy and confirms that if a
business believes that it has
overpaid SDLT, it may make a claim
for overpayment relief.
28 June 2016
Revenue & Customs Brief 11/2016
HMRC has issued Revenue & Customs Brief 11/2016. This follows the Upper
Tribunal's judgment in the case of Intelligent Managed Services Ltd (IMSL). The brief
reverses HMRC's existing policy in relation to the transfer of a business as a going
concern (TOGC), where the transferor or transferee are members of a VAT group.
IMSL transferred part of its business and assets to Virgin Money Management Services
Ltd (VMMSL) whereupon, VMMSL carried on that business wholly within the existing
Virgin Money Group (VMG) VAT group. It did not make supplies of goods or services
to third parties outside the VMG VAT group and, as a consequence, due to the
operation of the VAT group rules, HMRC took the view that the business activity had
ceased. As a result, HMRC concluded that one of the legal conditions for there to be a
TOGC – the condition which states that the transferor must 'carry on' the same kind of
business – was not met.
The Upper Tribunal concluded in its judgment last year that HMRC's argument was
unfounded. Whilst the VAT group rules create a fiscal fiction that there is no supply of
goods or services between members of the same VAT group, it was clear that VMMSL
had, as a matter of fact, carried on the business previously carried on by IMSL albeit
that its services were supplied intra-group. HMRC now accepts that its previous policy
in this regard was incorrect. Accordingly, where a business is acquired as a going
concern by a company within a VAT group, provided that all other conditions are met,
the transfer can be regarded as a TOGC for VAT purposes. This is the case even if the
transferee only provides goods or services to other members of the VAT group.
HMRC also accept that where a VAT group transfers a business out of its VAT group
to a third party transferee the transfer is equally capable of being a TOGC even if, prior
to the transfer, the business being transferred was conducted solely within the seller's
VAT group.
HMRC reverses policy on VAT: TOGC's
VAT Alert
Contact Stuart Brodie Scotland [email protected] (0)14 1223 0683
Karen Robb London & South East [email protected] (0)20 772 82556