Transfer of Going Concern
The transfer of a business as a going concern is outside the scope of VAT if all of the following apply:
- All, or an autonomous part, of a business (assets, stocks, goodwill) is transferred
- The transferor is a taxable person
- The transferee is or becomes a taxable person
- The transferee continues, without a substantial pause, to carry out a business of the same nature
In this case the transferor must not charge any amount as VAT and the transferee is not allowed to credit any amount as input tax, even if the transferor has by mistake charged an amount as VAT. If as a result of the transfer the transferor terminates taxable supplies, he must notify within sixty days the VAT Service by submitting an “Application for Cancellation of Registration” (Form VAT 204). Furthermore, if the transferee becomes liable to be registered, then he has to notify within thirty days the VAT Service by submitting an “Application for Registration in the VAT Register” (Form VAT 101).
If both the transferor and the transferee wish, they may submit an “Application for the Transfer of VAT Rights and Obligations” (Form VAT 103), upon which, if approved, the transferor has to hand over his accounting books and records to the transferee and the transferee will take up all previous rights and obligations of the transferor. The transfer of rights and obligations is allowed if the whole of the business is transferred, the transferor’s registration is cancelled and the transferee is not already a registered person but becomes liable to be registered or is registered voluntarily. By submitting the aforementioned form, the registration of the transferor will automatically be cancelled therefore there is no need for submitting an “Application for Cancellation of the VAT Registration” (Form VAT 204). However, the transferee still has to submit an “Application for Registration in the VAT Register” (Form VAT 101) in order to be registered.
Relevant to the above is the information leaflet 7 “Transfer of Going Concern".