TOGC in a property that is partially-let
Q: My VAT registered client is buying a commercial property that is opted to tax by the VAT registered seller. The seller currently rents part of the property out + VAT, and occupies the rest itself. My client plans to carry on renting out to the existing 3rd party tenants by having the lease novated over into its name as landlord; it plans to use the rest of the property for its existing web design business however. Can the property sale be a transfer of a business as a going concern (TOGC) or not for VAT purposes given it is only partially-let?
A: As long as at least part of the property is being used for a (property letting) business, and that use is not negligible, then the whole property can be transferred as part of an outside the scope of VAT TOGC. However all of the normal TOGC criteria need to be met for the outside the scope treatment to apply, plus 2 additional requirements due to the seller having opted to tax the property: the buyer must a) notify its own option to tax on the property to HMRC and b) confirm in writing to the seller that the buyer's option to tax will not be disapplied by the anti-avoidance rules. Both of these actions must be completed by the buyer before the "relevant date" (earlier of deposit, unless to an independent stakeholder, or completion).