Readers’ forum: TOGC option

My client trades as a restaurant and has been given the chance to buy the freehold of the property which they currently rent from a third-party landlord. The landlord has opted to tax the building so intends to charge 20% VAT on the sale; he also charges VAT on the rent. Although my client can obviously claim input tax the VAT payment will create a cash flow challenge and also an extra stamp duty land tax (SDLT) cost.

A suggestion has been made that my client could form a separate company to own the property asset register for VAT and make an option to tax election and charge rent to the trading business. The sale would then be exempt from VAT as a TOGC (transfer of a going concern).

Do readers agree that this is an option? Are there are any hidden pitfalls?

Query 19 834 – Turkish...