Categories:Business Tax

HMRC: change in policy regarding TOGCs


Following the case of Robinson Family Ltd v HMRC, HM Revenue & Customs have been forced to retreat from their long standing position that the grant of an overriding lease does not amount to a transfer of a going concern.

The case of Robinson Family Ltd v HMRC has determined that for VAT purposes a TOGC did occur when the claimant sold, by way of a sub-lease, its interest in property. The key points of the case are:

  • The court must look at the substance rather than the form of the transaction.
  • Where the transferee is effectively carrying on exactly the same business as the transferor then prima facie, the TOGC provisions should apply.

Professional advisers have been arguing that HMRC have been getting this point wrong for years. It is generally thought that their stubborn stance has been born out of a fear of increased VAT avoidance. Given the wealth of anti-avoidance legislation and case law it is difficult to understand exactly what they were scared of…

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