It’s always been accepted that the sale of a let property can, subject to compliance with various conditions, rank for VAT purposes as the transfer of a business as a going concern. Until fairly recently, HMRC took the view that TOGC treatment was not available unless the vendor sold his complete interest in the let property. For example, they argued that TOGC treatment was not available where a freeholder of tenanted property disposed of a 999-year lease subject to the tenancy, as they considered this to be the disposal of an asset (the lease) and not the disposal of a property rental business. The Tribunal case of Robinson Family Ltd [2012] UKFTT 360(TC) changed that: the tribunal held that you have to look at the economic substance of what is transferred, not the legal form. If the business is not in substance altered, it’s a TOGC.
This means that in some cases transactions which properly should have been treated as TOGCs will have been subject to VAT; and HMRC have accepted that claims to repayment of VAT may be made in appropriate circumstances.
But there is a knock-on effect. Since Stamp Duty Land Tax is calculated on the gross sales value (including any VAT) the failure to identify qualifying transfers as TOGCs will not only have led to the incorrect charging of VAT but also to the payment of an excessive amount of SDLT. And, happily, HMRC have now announced that they will also accept claims for potentially overpaid SDLT.
If, therefore, you are in that position (that is, you have within the past 4 years disposed of a property rental business by way of the grant of a long lease of the tenanted property), please contact us to explore how we can help.
