VAT on commercial property

Transfer of a Going Concern (TOGC): How It Removes VAT From a Property Deal

PropertyVAT Team · Updated 20 October 2026 · 3 min read

A transfer of a going concern is the one route that removes the VAT problem entirely rather than financing it. Where it works, there is no VAT to fund, no reclaim to wait for, and no extra stamp duty.

Where it fails, 20% of the purchase price appears on the completion statement at the worst possible moment.

What a TOGC is

VAT is charged on supplies of goods and services. A TOGC takes the view that where a business transfers as a going concern, there is no supply for VAT purposes at all — what has moved is a business, not an asset.

In commercial property this usually means a let investment property. The seller has a property rental business with tenants paying rent; the buyer takes over that same business, with the same tenants and the same leases.

The key distinction: the sale falls outside the scope of VAT. That is not the same as being exempt, though at completion the effect looks identical — no VAT changes hands.

Why it is worth pursuing

The VAT saving is a timing benefit — you would have recovered it eventually. The stamp duty saving is permanent. On larger transactions that second line is substantial, and it is the reason TOGC is worth proper advice rather than a quick assumption.

The broad conditions

The detail is technical and the application is fact-specific, but in outline a TOGC generally requires:

1. A business transfers, not just an asset. For property, that means a letting business with tenants, not a vacant building.
2. The buyer intends to carry on the same kind of business. Buying a let office to occupy it yourself usually breaks this.
3. The buyer is VAT registered, or becomes so as a result of the transfer.
4. Where the seller has opted to tax, the buyer must opt too, and notify HMRC by the relevant date.
5. No significant break in trading between the two owners.

Point four is where deals most often come unstuck, because it depends on the buyer taking action on a deadline rather than on the facts of the property.

Why TOGCs fail

• The buyer's option to tax was not notified in time. HMRC acknowledgement is not instant, and options are not normally backdated.
• The buyer intends to occupy rather than let. The business is not continuing; it is ending.
• The property is vacant. No tenants, no letting business, nothing to transfer.
• The sale is to the sitting tenant. The letting business often ends on completion rather than continuing, which can take the transaction outside TOGC treatment.
• A sale and leaseback or a quick onward sale changes the character of what is being transferred.

How to handle a deal where a TOGC is intended

Treat it as the expected outcome, but never as the only possible one.

1. Get VAT advice before exchange, not after. The conditions turn on facts that are easier to arrange early than to fix late.
2. Start your own VAT registration and option to tax immediately. This is the step most within your control and the one most likely to miss a deadline.
3. Agree in the contract what happens if TOGC treatment fails, including who bears the VAT and whether completion can move.
4. Have a funding plan for the 20%. Even a well-advised TOGC can fail on a late factual change, and the gap between discovering that and completing is often measured in days.

That last point is not pessimism. The buyers who end up in difficulty are rarely the ones whose TOGC failed — they are the ones whose TOGC failed and who had no plan B.

This guide is general information, not tax advice. TOGC treatment depends closely on the facts of the transaction — take specialist VAT advice before exchange.