© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
C9. Transfer of a going concern
TOGC NOT TREATED AS A SUPPLY
- Option to treat transfer of totality of assets/part thereof as not a supply of goods
"In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and that the person to whom the goods are transferred is to be treated as the successor to the transferor." (PVD Article 19)
EU legislation
- Power to prevent distortion of competition, evasion + avoidance
"Member States may, in cases where the recipient is not wholly liable to tax, take the measures necessary to prevent distortion of competition. They may also adopt any measures needed to prevent tax evasion or avoidance through the use of this Article." (PVD Article 19)
UK legislation
- Additional measures must comply with proportionality and neutrality
"[38] In the second place, it is for the referring court to assess, in the light of the principle of proportionality, whether the 100% ownership condition is necessary and appropriate for attaining the objectives of combating tax evasion or avoidance.
...
[40] In the third place, it is also for the referring court to ascertain whether the 100% ownership condition complies with the principle of fiscal neutrality, which precludes inter alia treating economic operators carrying out the same transactions differently for VAT purposes (see, to that effect, judgment of 15 April 2021, Finanzamt für Körperschaften Berlin, C‑868/19, not published, EU:C:2021:285, paragraph 65 and the case-law cited)." (Sampension Livsforsikring T-268/25)
- Transfer of whole business
"(1) Subject to paragraph (2) below, there shall be treated as neither a supply of goods nor a supply of services the following supplies by a person of assets of his business—
(a) their supply to a person to whom he transfers his business as a going concern where—
(i) the assets are to be used by the transferee in carrying on the same kind of business, whether or not as part of any existing business, as that carried on by the transferor, and
(ii) in a case where the transferor is a taxable person, the transferee is already, or immediately becomes as a result of the transfer, a taxable person or a person defined as such in section 3(1) of the Manx Act;" (SI 1995/1268, Article 5)
- Transfer of part of business capable of separate operation
"(1) Subject to paragraph (2) below, there shall be treated as neither a supply of goods nor a supply of services the following supplies by a person of assets of his business—
[...]
(b) their supply to a person to whom he transfers part of his business as a going concern where—
(i) that part is capable of separate operation,
(ii) the assets are to be used by the transferee in carrying on the same kind of business, whether or not as part of any existing business, as that carried on by the transferor in relation to that part, and
(iii) in a case where the transferor is a taxable person, the transferee is already, or immediately becomes as a result of the transfer, a taxable person or a person defined as such in section 3(1) of the Manx Act." (SI 1995/1268, Article 5)
Going concern
(1) BUSINESS TRANSFERRED AS A GOING CONCERN
Totality of assets
- What needs to be transferred depends on the nature of the business
"[16] The Court has also held that particular importance must be attached to the nature of the economic activity which it is sought to continue in the context of an overall assessment of the factual circumstances of the transaction at issue that it is necessary to carry out in order to determine whether it is covered by the concept of the ‘transfer of a totality of assets’ within the meaning of the VAT Directive (see, to that effect, judgment of 10 November 2011, Schriever, C‑444/10, EU:C:2011:724, paragraph 32)." (Mailat C-17/18)
- Immoveable assets need not be transferred if not necessary for pursuit of economic activity
"[17] Thus, where an economic activity does not require the use of particular premises or of premises equipped with fixtures necessary for the pursuit of the economic activity, there may be a transfer of a totality of assets within the meaning of the first paragraph of Article 19 of the VAT Directive even without the transfer of ownership of an immovable asset (see, to that effect, judgment of 10 November 2011, Schriever, C‑444/10, EU:C:2011:724, paragraph 27)." (Mailat C-17/18)
- In some cases moveable and immoveable assets will form an inseparable bundle
"[18] Regarding economic activity that entails the use of an inseparable bundle of movable and immovable property, the Court has, in addition, considered that there is no transfer of a totality of assets within the meaning of the first paragraph of Article 19 of the VAT Directive if the transferee has not taken possession of the business premises. In particular, if the business premises are equipped with fixtures necessary for the pursuit of the economic activity, these items of immovable property must form part of the elements transferred in order for the transaction to qualify as the transfer of a totality of assets, or of a part thereof, within the meaning of the VAT Directive (see, to that effect, judgment of 10 November 2011, Schriever, C‑444/10, EU:C:2011:724, paragraph 28)." (Mailat C-17/18)
- Restaurant business is inseparable from premises
"[19] As regards the activity at issue in the main proceedings, that is, the operation of a restaurant, it must be stated that it is an activity that, in principle, cannot be pursued without business premises. Aside from mobile catering services, in order to pursue a catering activity, the operator must have premises that can be used as a kitchen, in which the equipment, utensils and ingredients necessary to prepare dishes can be stored. However, the case in the main proceedings concerns, not a mobile catering activity, but the operation of an establishment at a fixed address with both a kitchen and a dining area." (Mailat C-17/18)
Transfer
- Premises may be transferred by grant of lease
"[20] It should be borne in mind that, even if the economic activity at issue is one which cannot be carried out without business premises, it is not necessary, in order to ensure the continuation of some business activities transferred, for the owner of that business also to be the owner of the building within which it is operated (see, to that effect, judgment of 10 November 2011, Schriever, C‑444/10, EU:C:2011:724, paragraph 34). Thus, the Court has held that, where the continuation of the economic activity in question requires that the transferee use the same premises as were used by the transferor, there is no reason in principle why possession of those premises may not be transferred by means of a lease contract (judgment of 10 November 2011, Schriever, C‑444/10, EU:C:2011:724, paragraph 36)." (Mailat C-17/18)
- But failure to take ownership of large part of items necessary to carry on business means recipient not in a position to dispose of business themself (no togc)
"[27] However, even though, in the case in the main proceedings, it is not disputed that the lessee pursued for over two years the autonomous economic activity previously carried out by the lessor and, as is apparent from the observations submitted to the Court, took over the employees, kept the same suppliers and honoured the business commitments previously entered into by the lessor towards its customers, the fact remains that the lessee was never in a position, as such, to liquidate the activity concerned, in so far as, not having taken ownership of a large part of the items necessary to pursue that activity, it was not entitled to dispose of them." (Mailat C-17/18)
Part of business
- Must be capable of separate operation
"(b)their supply to a person to whom he transfers part of his business as a going concern where—
(i)that part is capable of separate operation,..." (SI 1995/1268, Article 5(1)(b))
(2) TRANSFEREE INTENDS TO CARRY ON SAME KIND OF BUSINESS
- Assets to be used by transferee in carrying on same kind of business as transferor
Whole business transferred
"(i) the assets are to be used by the transferee in carrying on the same kind of business, whether or not as part of any existing business, as that carried on by the transferor...; (SI 1995/1268, Article 5(1)(a))
Part of business transferred
"(ii) the assets are to be used by the transferee in carrying on the same kind of business, whether or not as part of any existing business, as that carried on by the transferor in relation to that part..." (SI 1995/1268, Article 5(1)(b))
- Transferee must intend to operate business and not immediately liquidate + sell stock
"[25] In addition, it is necessary to add, first, that, in order to be covered by the concept of ‘transfer of a totality of assets or part thereof’ within the meaning of the first paragraph of Article 19 of the VAT Directive, the transferee must have had the intention to operate the business or the part of the undertaking transferred and not simply to immediately liquidate the activity concerned and sell the stock, if any (see, to that effect, judgment of 27 November 2003, Zita Modes, C‑497/01, EU:C:2003:644, paragraph 44)." (Mailat C-17/18)
- Intention must be supported by objective evidence
"[26] In that regard, it is apparent from the Court’s case-law that the buyer’s intentions can or, in some circumstances, must be taken into account in the overall assessment of the circumstances of a transaction, provided that they are supported by objective evidence (judgment of 10 November 2011, Schriever, C‑444/10, EU:C:2011:724, paragraph 38)." (Mailat C-17/18)
(3) TRANSFEREE IS TAXABLE PERSON
- If transferor is taxable person, transferee must be/immediately become taxable person
Whole business transferred
"(ii) in a case where the transferor is a taxable person, the transferee is already, or immediately becomes as a result of the transfer, a taxable person or a person defined as such in section 3(1) of the Manx Act;" (SI 1995/1268, Article 5(1)(a))
Part of business transferred
"(iii) in a case where the transferor is a taxable person, the transferee is already, or immediately becomes as a result of the transfer, a taxable person or a person defined as such in section 3(1) of the Manx Act" (SI 1995/1268, Article 5(1)(b))
(4) LAND/BUILDINGS: FURTHER CONDITIONS
Supply of land/buildings that would be exempt but-for option tax
VAT
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