VAT News

Trying to buy a Business VAT Free – How a Deposit payment may undermine that


The First-tier Tribunal has released its decision in Clark Hill Ltd, a recent case concerning tax points and the Transfer of Going Concern (TOGC) VAT rules.

In order for a transfer to qualify for TOGC treatment it must satisfy certain conditions. Where the transfer includes property, one of these conditions is that the purchaser must opt to tax the property by the “relevant date”.  This is usually completion (i.e. the time of supply) but in some instances may be the date that a deposit is paid (if this is not into a stakeholder account).

Where such a deposit is paid, a tax point is created, and this becomes the “relevant date”.  If the purchaser has not opted to tax the property by this time the transfer cannot be treated as a TOGC and VAT will be chargeable on the transfer where applicable.

This was confirmed in Clark Hill Ltd where the taxpayer sold some properties, some of which included deposits paid by the purchasers.  As the deposits were paid prior to an option to tax, the properties in question fell outside of the TOGC conditions and did not obtain the favourable VAT treatment.

This case stresses the importance of understanding the TOGC conditions and applying them at the appropriate time.  Therefore, if you have any questions or require further information on TOGCs please contact us on 01633 415390 or

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