Status of stock and assets sale

The taxpayer purchased fixed assets and stock from an associated company OMF between March and May 2011 in 16 transactions. The invoices included the consideration and VAT. The taxpayer claimed the input tax on its VAT returns. However OMF went into liquidation in October 2011 and did not pay HMRC the output VAT charged on the invoices.

HMRC disallowed the input tax claim on the basis that the transactions constituted a transfer of a going concern. They argued in support that the two companies carried on the same kind of business and that the taxpayer also took on five employees from OMF. The taxpayer appealed.

The First-tier Tribunal said there was no “credible explanation” of how OMF could have continued trading after the transfers to the taxpayer. The factors pointed towards the transactions forming a transfer of a going concern and the conditions of VAT...