In Mark Young T/A The St Helens v HMRC [2012] TC02371 the First-tier Tribunal (FTT) found that the grant of a lease over a restaurant was a transfer of a going concern for VAT purposes, as a result the purchaser was required to be VAT registered.

Under s49 VATA 1994, where a business is transferred as a going concern its previous supplies are taken into account when considering the VAT registration threshold.

  • A restaurant had been run for several years from leased premises.
  • The taxpayer formed a company Bonne Bouchee and it ran a successful restaurant from the premises before going into liquidation.
  • The landlord repossessed the premises.
  • A couple of weeks later, the landlord granted a new lease to Mr Young in his personal capacity. He then reopened the restaurant.
  • HMRC argued that the taxpayer should be VAT registered from the moment he started up the restaurant, as there had been a transfer of the business as a going concern.

The FTT agreed with HMRC that there had been a transfer of a going concern:

  • The fact that there had been no direct supply of assets between Bonne Bouchee and the taxpayer was irrelevant: for the purposes of s49 there merely has to be a transfer of a business as a going concern.
  • The business of the taxpayer was fundamentally the same business as that previously carried on at the premises.
  • The lease of the premises and fixtures and fittings from the landlord meant that the taxpayer had everything necessary to allow him to carry on the business: he held everything the last businesses owner did except for its stock.
  • The break in trade of around 3 weeks was not sufficient to mean there was no transfer of a going concern.
  • The fact the transfer of premises and equipment was made via the landlord did not mean there wasn’t a transfer of a going concern.

The taxpayer’s appeal was therefore dismissed.


Our subscriber guides:

Registering for VAT

VAT traps on taking over a business

Transfer of a going concern (TOGC)

Case reference: Mark Young T/A The St Helens v HMRC [2012] TC02371


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