Home Business The role of tax considerations when selling commercial property as a going concern in the UK

The role of tax considerations when selling commercial property as a going concern in the UK

by Kanne

Investment in a property is usually considered a long-term commitment. The value of a property may escalate or fall following the economic trajectory of the country. However, over the past decade, real estate investments have surpassed various other major investment sectors. If you require assistance in buying or renting a commercial property for sale in London, our estate agents can provide their expertise and assistance and make the entire process smooth and seamless for you.

Unforeseen circumstances may require an investor to dissolve his /her assets even when forecasts suggest the value of the investment would increase. Commercial property in Uthe K can be sold as a going concern, but besides the complexity of this process, the biggest issue to be tackled is VAT. It is a commonplace practice for Vat to be charged on the sale of commercial property. If a commercial property is subject to an option of tax or is less than 3 years old, VAT will be applied

Transfer of a Going Concern (TOGC)

When a commercial property is put up for sale under TOGC, it means that the buyer is taking charge of not only the business but also the property from where the business activity is handled. The seller offers to sell his business and property as a single entity. This process makes the situation quite advantageous for both the buyer and seller as it facilitates streamlining the transaction and economising money on VAT.

Before proceeding with the sale of a commercial property, a seller needs to assess the implications of various tax considerations on his net proceeds.


A property may be exempt from VAT if it is eligible to be sold under TOGC rules. Hire competent legal advisers, who will thoroughly scrutinise your TOGC before proceeding with the sale, a poorly brought out transfer of a going concern can have serious implications for you as a seller.

Under the rules of TOGC, the sale of a business can function on its own and falls under the purview of Transfer of a going concern if criteria are met satisfactorily. The foremost and most important criterion is seller promises to continue with the same business, from the same property after signing the sales deed. If this prerequisite is met successfully, the seller may sell his commercial property without Vat being levied.

The buyer and seller both must give their consent for agreeing to certain conditions, for instance, the buyer must provide proof that he is a chargeable/taxable person. Both the seller and buyer must agree in writing that they will use the sale as a Transfer of a going concern (TOGC). After the requirements are met the sale deed will be deemed as TOGC and the seller won’t have to pay VAT.

Stamp Duty Land Tax (SDLT)

SDLT is an obligatory tax, liable to be charged on the acquisition of all land and buildings through sale deeds. It is calculated on a flexible scale against the closing sale price. Sale falling under150,000 pounds is not taxable as it falls outside the tax bracket for commercial property. 1% SDLT is supposed to be paid for properties ranging from 150,00 pounds to 5 million pounds and 2% thereafter. Hence, the property sold for 750,000 pounds will be liable to pay 6,000 pounds as Stamp Duty Land Tax.

Although, if the purchase of property comes under Transfer of going concerned, then stamp duty will be calculated on the selling price which is inclusive of VAT. Thus, creating a double tax. However, if the HMRC finds all conditions for TOGC acceptable, the Stamp Duty and Land Tax charged on VAT can be eliminated, ensuring a reasonable amount as saving for the buyer.


There is quite a complex section of VAT rules, and since the prices of properties for sale are high priced, the VAT consequences of making a mistake can be immense.

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