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FTT Finds Immediate Onward Sale Prevents TOGC Relief
Thursday 31st October 2019
The FTT has recently heard an appeal against HMRC’s refusal to allow TOGC relief in relation to a sale of tenanted property as the purchaser made an immediate onward sale of the property.
In General Distribution Storage Ltd v HMRC [UKFTT 559 TC], the FTT dismissed an appeal by the appellant against an assessment for VAT that had been charged on the sale of a tenanted property, but which the appellant claimed was a transfer of a going concern for VAT purposes. However, as the purchaser made an immediate onward sale of the property, it was held that it could not have had any intention to carry on the business, as required by the relevant provisions, and VAT was therefore due and the assessment upheld.
GDSL was the freeholder of a property which was leased to a third party tenant for 15 years. On 5 April 2016 the property was sold, with the benefit of the existing lease, to Hartlone Scaffolding Ltd (HSL) and VAT of £160,000 was charged on the selling price which HSL paid.
HSL had already exchanged contracts to sell on the property and had notified an option to tax. HSL sold the property to Foundry Investments Ltd (FIL) on 5 April 2016, charging VAT of £163,000 which FIL paid.
Following HMRC’s compliance visit to FIL to verify their input tax claim, it became apparent GDSL had not declared the VAT charged to HSL as output tax and an assessment was issued.
GDSL claimed VAT was not due as the transaction fell within the TOGC provisions because GDSL and HSL could both be described as property investment businesses, However, there was little evidence to support this contention. GDSL had registered for VAT in 2005 and described its main business activity as cash and carry, whilst HSL had described itself as a scaffolding business when registering for VAT in November 2015.
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