TOGCs: connected parties and anti-avoidance

Determining the VAT status of business transfers and the application of the TOGC rules is not straightforward, requiring an objective assessment of many factors to determine whether the requirements are met. The position becomes more complicated when connected parties are involved, either in the transfer itself or because the business transacts with members of the vendor’s or the purchaser’s VAT group. The recent tribunal case of Amor Interiors reinforces HMRC’s policy on when a transaction between connected parties qualifies as a TOGC. However, in Intelligent Managed Services, HMRC’s interpretation of the TOGC provisions for transactions involving VAT groups is called into question. While that decision is good news for potential TOGCs involving VAT groups, the benefits could be offset by the self-supply rules, which all partially exempt VAT groups need to consider.