Supply of goods or services?

Output tax due on assets and stock transferred to a sister company

The taxpayer which was VAT-registered operated a beauty business until the end of June 2012 when it transferred the business to BASL (which was not VAT-registered). The director explained that the reason for the transfer was her intention to use the taxpayer company as a vehicle for exporting goods only. She said the assets had not been transferred to the new company it had instead been given the right to use them indefinitely without charge.

The taxpayer submitted a repayment VAT return for June 2012 for £10 077.

HMRC increased it by £9 914 on the basis that stock and assets had been transferred to BASL. Further the transfer of a going concern rules did not apply because BASL was not VAT-registered. The extra output tax was based on the market value of...