A transfer of a going concern (TOGC) is treated as neither a supply of goods nor a supply of services — it sits outside the scope of VAT entirely. For property, that matters most on the purchase of a tenanted building where the seller has opted to tax: without TOGC treatment the sale is standard-rated, and while a fully taxable buyer may eventually recover that VAT, it must fund 20% of the price at completion — and pay SDLT calculated on the VAT-inclusive amount, a cost that is never recovered. TOGC treatment removes both.

Why a Tenanted Property Can Be a “Business”

The insight underpinning property TOGCs is that a let building is not just an asset — it is a property rental business: an income stream, tenants, leases, and management. Sell the building with the letting business attached, to a buyer who carries that business on, and you have transferred a going concern. Sell an empty building with no letting activity, and you have sold an asset — no TOGC is available, whatever the contract says.

The General TOGC Conditions

Every TOGC — property or otherwise — must satisfy the core conditions:

  • The assets are sold as part of a business that is a going concern at the point of transfer
  • The buyer intends to use the assets to carry on the same kind of business as the seller — for property, continuing to let to the tenants
  • The buyer is VAT-registered, or becomes registrable as a result of the transfer, at the relevant date
  • There is no series of immediately consecutive transfers — a same-day onward sale to a third party breaks the chain
  • Where only part of a business is transferred, that part must be capable of separate operation

The Extra Conditions for Opted Property

Where the property would be standard-rated in the seller's hands — because the seller has opted to tax, or the building is a “new” commercial building — two further conditions fall on the buyer, and both must be satisfied by the relevant date:

  • The buyer must itself opt to tax the property and notify HMRC of that option
  • The buyer must notify the seller that its option to tax will not be disapplied by the anti-avoidance rules (the standard confirmation given via HMRC's form VAT1614D framework)

Miss either, and the TOGC fails for the property: the seller must charge VAT on the sale even though everything else about the deal was a going concern.

The Deposit Trap

The “relevant date” is the date of the supply — usually completion, but an earlier tax point is created if a deposit is paid to the seller, or to the seller's solicitor or agent acting as principal rather than stakeholder. On a standard exchange with a 10% deposit released to the seller, the buyer's option to tax must be made and notified to HMRC before exchange, not before completion. This single timing point is the most common way property TOGCs fail in practice, and it's cheap to get right: make and notify the option early in the transaction, not at the end.

What Qualifies — the Practical Fact Patterns

  • Fully or partly let building sold to an investor who continues the lettings — the paradigm TOGC, and partial vacancy doesn't prevent it where a genuine letting business exists
  • Building with a tenant-in-place but rent-free period, or actively marketed vacant units — can still qualify, since a letting business includes seeking tenants; evidence of marketing matters
  • Sale to the existing tenant — fails: the letting business ends at completion (the lease merges), so there's nothing for the buyer to carry on
  • Sale of a vacant building with no letting activity — fails: asset sale, not a business transfer
  • Seller selling to a buyer who will occupy it for its own trade — fails as a property-rental TOGC: the buyer isn't continuing the same kind of business
A modern commercial office building
A TOGC transfers the letting business, tenants and all, from seller to buyer.

Getting It Wrong Costs Real Money in Both Directions

If the parties charge VAT on what was actually a TOGC, the “VAT” on the invoice is not VAT at all — HMRC can refuse the buyer's input tax claim, leaving the buyer to recover the money from the seller under the contract, and the buyer has meanwhile overpaid SDLT on the inflated consideration. If the parties treat a sale as a TOGC when the conditions weren't met, HMRC assesses the seller for output VAT of one-sixth of the price received, plus interest and potentially penalties — years after completion, from a buyer who may be long gone. This is why well-drafted contracts deal with VAT both ways: a warranty of the facts supporting TOGC treatment, and an obligation on the buyer to pay VAT in addition if HMRC later determines the treatment was wrong.

The Capital Goods Scheme Follows the Building

TOGC treatment does not wipe the property’s VAT history. If the building is within the Capital Goods Scheme — broadly, where capital expenditure excluding VAT met the threshold within the last ten years (£250,000 for expenditure incurred before 29 July 2026, £600,000 on or after) — the buyer inherits the remaining adjustment intervals, stepping into the seller’s position. The buyer needs the seller’s CGS records (total input tax, baseline recovery, adjustments to date) to operate the scheme, and should treat obtaining them as a completion requirement, not an afterthought. A buyer whose own use of the building will be less than fully taxable should price the future CGS repayments into the deal.

The SDLT Angle

SDLT is charged on the VAT-inclusive consideration. On a £5 million purchase carrying £1 million of VAT, the buyer pays SDLT on £6 million; as a TOGC, on £5 million. At commercial rates that is an absolute saving of up to £50,000 on this example — money that no VAT recovery ever gives back. For buyers with restricted recovery (partially exempt occupiers, for instance), the TOGC saving is larger still, because the VAT itself would have been a real cost.

A Completion Checklist for Buyers

  • Confirm the seller's option to tax with evidence (the notification and HMRC acknowledgment), and whether the building is within the CGS
  • Make and notify your own option to tax before any deposit creates a tax point — and diarise HMRC's notification as a condition of exchange
  • Give the seller the VAT1614D-style confirmation that your option won't be disapplied
  • Ensure your VAT registration is effective by the relevant date
  • Check the contract deals with VAT in both failure directions, and requires delivery of CGS records
  • Confirm the letting business genuinely continues at completion — no surrender to yourself, no immediate onward transfer

TOGC treatment on a property deal is entirely procedural: the law is settled, and success is a matter of sequencing notifications and evidence correctly against the transaction timetable. The full property VAT context — the option to tax, zero-rating, and the exemption default — is covered in our detailed guide to VAT on land and property.