TOGC stands for transfer of a going concern — the VAT rule under which the sale of a business, or part of one, is treated as outside the scope of VAT entirely. Meet the conditions and no VAT is charged on the sale price; fail them while assuming you met them and someone is writing a very unpleasant cheque. On a £2 million business sale where the assets would otherwise all be standard-rated — an opted property with its rental business, say — the difference between TOGC and not-TOGC is £400,000 of VAT flowing, or not flowing, through the deal, plus a stamp duty land tax saving (England and Northern Ireland) that most buyers only hear about after completion. This is a sale of the business's assets, note — a share sale is a different transaction with no VAT on the price at all.
TOGC is not a relief you claim; it is a status that applies automatically when the facts fit. That is exactly why it causes so much trouble — you cannot elect into it, you cannot elect out of it, and the parties' intentions in the contract do not change what the facts are.
The conditions, plainly stated
Per VAT Notice 700/9, a transfer qualifies when all of the following hold:
- The assets are sold as a going concern — a business that is running, not a pile of assets from one that stopped;
- The buyer intends to use them to carry on the same kind of business;
- The buyer is VAT-registered, becomes liable to register as a result of the transfer, or has an accepted voluntary registration in place — and a seller trading below the threshold, unregistered, can still transfer a TOGC;
- There is no significant break in trading around the transfer;
- Where only part of a business is sold, that part is capable of separate operation;
- There is no immediately consecutive series of transfers — A selling to B selling to C on the same day breaks the chain.
"Same kind of business" is read sensibly rather than pedantically — a buyer can rebrand a restaurant without losing TOGC status — but a buyer acquiring a trading company's premises to use as its own head office is not carrying on the seller's business, and no amount of drafting says otherwise.
Property: where TOGC gets sharp
The highest-stakes TOGCs involve commercial property — typically a tenanted building sold as a property rental business. Where the seller has opted to tax the property (or it is new commercial property that would be standard-rated), two extra conditions bite, and both sit with the buyer:
- The buyer must opt to tax the property and notify HMRC no later than the relevant date — normally completion, but an earlier deposit release to the seller's solicitor as agent can accelerate it. Opting the day after completion is a day too late: the property falls out of TOGC treatment and carries VAT, even though the transfer of the other business assets can still qualify;
- The buyer must confirm its option will not be disapplied under the anti-avoidance rules — the standard "article 5(2B)" confirmation that appears in sale contracts precisely because its absence lets the seller refuse TOGC treatment.
One legitimate exception runs the other way: a buyer converting the building to dwellings can serve form VAT1614D, disapplying the seller's option — at which point that element is not a TOGC, and the VAT analysis changes again. Property TOGCs reward walking the sequence through with an adviser before exchange, not after. Our property VAT team spends a good share of its time on exactly this choreography.
Getting it wrong, in both directions
Charging VAT when TOGC applied. The seller adds 20%, the buyer pays it and reclaims it as input tax — except it was never VAT, because the supply was outside the scope. HMRC can refuse the buyer's reclaim, and the buyer's remedy is chasing the seller for a credit note and repayment, which is a contractual argument, not a tax mechanism. On a completed deal with a seller who has since dissolved or spent the money, that goes about as well as it sounds.
Not charging VAT when TOGC did not apply. The mirror image: the conditions quietly failed — the buyer's option to tax was notified late, the buyer was not registered in time, the "business" had already ceased — and the seller has made a taxable supply with no VAT charged. The exposure is element by element, each asset at its own normal VAT liability, with opted property the usual big-ticket item. HMRC assesses the seller for the output tax, with interest and potentially penalties, and the seller's ability to recover it from the buyer depends entirely on how the contract was drafted years earlier.
Well-advised contracts handle the uncertainty explicitly: a warranty from the buyer on registration and option status, an obligation to pay VAT against a valid invoice if HMRC later rules the transfer taxable, and evidence of the buyer's option retained with the completion papers.
The SDLT bonus nobody mentions until completion
Stamp duty land tax is charged on the VAT-inclusive price. A valid TOGC strips VAT out of the consideration, so the buyer's SDLT bill drops too — at the 5% top commercial rate on what would have been 20% VAT, the saving approaches 1% of the purchase price. On the £2 million building, that is roughly £20,000 of SDLT on top of the £400,000 of VAT that never has to be financed. Cashflow is the real point: even a fully recoverable VAT charge has to be funded between completion and the next VAT return.
Practical checklist before exchange
For sellers: confirm the buyer's VAT registration and, for opted property, hold written evidence of the buyer's option and its HMRC notification before treating the sale as a TOGC. For buyers: get the option notified early, deliver the disapplication confirmation, and check the acquired business genuinely continues — a planned six-month closure for refurbishment is the kind of fact that unravels the analysis. Both sides: put the VAT clauses in the contract while everyone is still friends.
TOGC questions tend to arrive attached to bigger transactions, which is where our VAT planning team works alongside the deal advisers — and if you are at the earlier stage of buying or selling a business, the VAT treatment belongs on the first structuring call, not the last.