Case: Compulsory VAT registration for TOGC

In KC TC 10014, the First-tier Tribunal (FTT) confirmed that a business transfer can be a transfer of a going concern (TOGC) for VAT purposes even where the seller was not VAT registered, provided the seller was required to be registered.

The appellant, formerly an employee of Wok to Box Ltd, continued the company’s takeaway business as a sole trader with no break in trading after the company (which had never been VAT registered) was dissolved. HMRC argued the transaction was a TOGC and that the appellant was liable to register for VAT from the date of transfer. The appellant contended that, because the transferor was not registered and his post-transfer turnover did not exceed the VAT threshold, he was not required to register.

The FTT focused on whether Wok to Box Ltd had been a “taxable person” at the time of transfer. Evidence from online food platforms showed the company had exceeded the VAT registration threshold from 2017 until dissolution and was therefore required to be registered. As a “taxable person” includes anyone who is, or is required to be, registered (VATA 1994, s.3), the TOGC rules in VATA 1994, s. 49 applied. The appellant was treated as having carried on the business before and after the transfer.

Given that the registration threshold had been exceeded in the 12 months before transfer and there was no evidence turnover would fall below the de-registration threshold, the FTT held the appellant was liable to register for VAT from the transfer date.