Buying or selling a business

The buying and selling of a business, or businesses, can be one of the most complex forms of transaction that you will ever carry out.

It is difficult enough for large corporations with vast legal support, let alone the small owner-managed business expanding its business interests or perhaps even selling to retire.

Apart from the direct taxation issues, which can significantly affect the way a transaction is structured, the VAT implications must be given serious consideration in order to prevent a large VAT bill on completion.

The method of sale will invariably have VAT consequences.  Some matters that should be considered:

  • The default position is VAT is due but there are exceptions.  If there is a transfer of a going concern for VAT purposes mandatory rules apply and any VAT charged might be irrecoverable
  • special rules apply to property which need to be considered by both the buyer and seller
  • some expenditure is subject to a ten year period of adjustment – this can be obligation can be acquired by the purchaser or be crystallised on sale.
  • any sale of shares can result in irrecoverable VAT
  • What is the VAT history of the acquisition – HMRC can normally look back four years – are you inheriting a problem?

This isn’t exhaustive but any due diligence needs to consider the VAT consequences and you need to be able to demonstrate reasonable care to HMRC.

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