Readers’ forum: Was VAT charged on business sale correct?

One of my clients recently purchased the assets and goodwill of a sandwich shop.

The previous owners closed the business when the first coronavirus lockdown happened and never reopened. So it did not trade for nearly two years.

My client has taken over the lease of the premises has retained some of the previous staff and bought some fixtures and fittings. He is also retaining the same trading name.

Because the business had been closed for so long we agreed that the VAT conditions of a transfer of a going concern (TOGC) had not been met so 20% VAT was charged by the seller.

HMRC has now disallowed my client’s input tax claim on the basis that it was still a business being sold because my client has kept the same trading name. The proceeds should have been outside the scope of VAT. Unfortunately ...