When selling a commercial property, the seller and buyer may elect to sell/buy the property as a Transfer of a Going Concern (“TOGC”). This arrangement facilitates the sale of not just the property, but also the business assets and operations associated with it. It is often used when the “business” operated from the property involves letting either the whole or individual parts of the property to commercial tenants.
TOGC and VAT: Potential Cost Savings
If the Seller has elected to waive the Value Added Tax (“VAT”) exemption on the property, so that VAT is payable on the purchase price of the property, one of the primary advantages of structuring the sale of a commercial property as a TOGC is that the transaction will be beyond the scope of VAT and therefore, VAT exempt (subject to certain criteria first being met). In structuring the transaction as a TOGC this exemption can lead to significant cost savings for both parties involved.
Why Buyers May Prefer a TOGC Structure
From the buyer’s perspective, a TOGC may be preferable as this enables the buyer to continue the business operations carried out within the property seamlessly, with an established business, assets, goodwill and customers, essentially a ‘turnkey’ business.
Importance of Legal Due Diligence
However, employing a TOGC model may provide an increased risk for the buyer as, in addition to assuming liability for the property itself, the buyer also inherits the responsibility for the acquired assets. As such, conducting thorough due diligence becomes paramount to assessing potential liabilities and mitigating risks effectively.
Fortunately, navigating the complexities of TOGC transactions is made easier with the assistance of a proficient legal team well-versed in corporate transactions and commercial property matters. By leveraging the expertise of professionals experienced in both areas, buyers and sellers can ensure that their transactions are executed with precision and diligence.
Early Legal and Financial Advice Is Key
The commercial property and corporate team within Oliver & Co have experts in these fields, who work closely together on the wider business/property transaction, so you know that your transaction will be overseen by the right people. Have a chat with us to discuss how we can assist you, by completing this quick contact form or call 01244312306.
Please note that this article does not constitute tax advice and is for the purpose of highlighting points for consideration. We suggest that if you are considering selling or purchasing any property as a going concern, that you seek financial and legal advice early on in the transaction to be assessed on a case by case basis.
