VAT treatment of contract transfers with reverse consideration — TOGC and assumption of liabilities

Summary

• Saffery’s article (13 July 2026) revisits the UK’s Transfer of a Going Concern (TOGC) rules, which treat qualifying business transfers as outside the scope of VAT. Under VAT Notice 700/9, a transfer qualifies only where the assets are capable of forming a separate business in their own right and the buyer uses them to carry on the same kind of business. TOGC treatment is mandatory—not elective—where the conditions are met, so no VAT is charged. [saffery.com], [gov.uk]
• The commercial logic is cash flow: without TOGC treatment, a buyer must fund VAT on completion and recover it later (in full or part depending on its recovery position), while for land and property TOGC also delivers an SDLT saving, since stamp duty is charged on a VAT-inclusive price. The “reverse consideration” and assumption-of-liabilities angle matters where a transferee takes on obligations as part of the deal—affecting whether there is genuine consideration and continuity of an independent economic activity. [saffery.com], [haysmac.com]
• Getting it wrong is costly. If VAT is charged in error on a TOGC, the transferee cannot recover it as input tax; the transferor must cancel the invoice, issue a credit note and refund the VAT—or the parties can seek a voluntary-disclosure ruling from HMRC. Because HMRC is increasingly reluctant to give written TOGC rulings, advisers recommend VAT-exclusive pricing clauses and careful contractual protection so the seller can charge VAT if HMRC later denies TOGC treatment. [saffery.com], [bdo.co.uk]

• Saffery
• GOV.UK – VAT Notice 700/9
• BDO – TOGC guide