New regulations for the transfer of going concerns
So, what is a transfer of a going concern (TOGC) and how will the new rules affect businesses?
A TOGC arises where the assets of a business are transferred. This is usually when a business, or part of a business, is sold to another person and the existing business ceases to trade. However, it also applies to transfers on death / retirement or the transfer to a new legal identity such as from a sole proprietor to a limited company. A TOGC does not arise where changes in the constitution of a partnership take place or there are transfers of shares in a limited company from one person to another. The TOGC rules are compulsory so it is important that the new rules are understood and adhered to.
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Hide AdPrior to the new rules the business records of the business being transferred on a going concern had to be transferred to the purchaser unless the seller had applied to HMRC for permission to keep the records.
From now on, it will be the seller which retains the records. This should help reduce some of the administration burden faced by small businesses. However, the seller will still have to make available to the purchaser any information which is necessary for them to comply with their VAT duties.
Where the buyer requests permission from HMRC to keep the old VAT registration number of the business they are buying, then the records must still be transferred to the buyer unless the seller has applied for permission to keep them.
As part of this legislation amendment it has also been confirmed that the transfer of a going concern rules includes part of a business “which is capable of separate operation”.
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Hide AdThe rule changes have been brought in as a simplification measure and to clarify the law relating to TOGC. If you are still in any doubt then you should consult your professional adviser or contact Glen Marshall at Landin Wilcock & Co on 0114 2754321.