Transfer of a Going Concern (TOGC) for Commercial Property
Written by Scott Jones, founder of CommercialPropertyKiln · Last updated
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A TOGC lets you sell a tenanted commercial property with no VAT on the price, provided strict conditions are met. It saves the buyer both the VAT cashflow and the SDLT on that VAT.
What a TOGC is
If you sell a property that is let, you are arguably selling a letting business, not just a building. Where the conditions are met, the sale is treated as a transfer of a going concern and is outside the scope of VAT.
The conditions
Broadly, for a tenanted property:
- The buyer must be VAT-registered (or become so).
- Where the seller has opted to tax, the buyer must also opt to tax and notify HMRC, and must not have their option disapplied, before completion.
- The buyer must intend to carry on the same kind of business, that is, continue letting.
- There must be no significant break in trading.
Where TOGC fails
TOGC commonly fails when the buyer does not opt in time, when the seller grants a new lease out of the freehold (which creates a new asset rather than transferring the business), or when the letting business does not genuinely continue. Because the SDLT saving rides on getting the VAT right, coordinate the option and the notifications carefully with advisers on both sides.
Can I sell a tenanted property without VAT?
Yes, as a Transfer of a Going Concern, if the conditions are met, including the buyer being VAT-registered and, where you have opted to tax, opting to tax and notifying HMRC before completion.
Why do TOGCs commonly fail?
Often because the buyer does not opt in time, the seller grants a new lease out of the freehold, or the letting business does not genuinely continue.