VAT – Registrations and Acquisitions

When the trade and assets are sold by a taxable person as a going concern, the buyer will inherit the seller’s turnover for registration purposes. So, where the seller was registered on a compulsory basis, the buyer will have to register from day 1. However, the transfer will then be outside the scope of VAT as a TOGC.

If the seller is registered on a voluntary basis, the buyer will still inherit the seller’s turnover, but they can choose not to register for VAT. You might choose not to be vat registered because you are dealing with unregistered customers. By choosing not to register, the buyer will breach the TOGC rules, meaning that the seller must charge VAT on the sale of the trade and assets.

If you are not registered you must monitor your turnover and register if you exceed the registration threshold. If at a future date you do register, any input tax on the assets purchased at take over may be recovered under the pre-registration input tax recovery rules providing the assets are still held at the date of registration.

Pre-registration input tax is recoverable on the first VAT return as follows:

• VAT on goods acquired in the previous four years still owned at registration;

• VAT on services incurred in the six months prior to VAT registration with a link to the post-registration period;

When a business registers, it is possible to ask for an earlier date, so it is important to think about the most beneficial registration date.



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