HMRC clarifies treatment of transfers

HMRC will now accept that the transfer of a business to a company in a VAT group can be a transfer of a going concern (TOGC) for VAT purposes as long as it intends to operate the same kind of business in supplying services to other group members who in turn make supplies outside of the group.

This change of policy follows the Upper Tribunal’s decision in favour of the taxpayer in Intelligent Managed Services Ltd.

HMRC’s former policy was that when a member of a VAT group acquired a business after which the only supplies were made to other members of that VAT group the acquisition could not be treated as the transfer of a business as a going concern. This was on the basis that the transferor’s business ceased at the point of transfer.

There may be situations in which a past overpayment of VAT...