Prior to 1 September 2007, the business records of a business
transferred as a going concern were required to be transferred to
the purchaser of the business. However the seller could apply to
HMRC for permission to keep the records.
Changes have been made to section 49 of the VAT Act 1994, and
regulation 6 of the VAT Regulations 1995 in respect of contracts
entered into on or after 1 September 2007. These changes were
announced in Budget Notice 58 and in VAT notes 04/07, and were
published in VAT Information sheet 12/07. These changes are
reflected in the revised notice 700/9.
From 1 September 2007, the seller of a business as a TOGC
retains the records. However, where the purchaser takes on the
seller’s VAT number, the seller is required to transfer the
records to the purchaser, unless the seller needs to retain the
records, in which case he may apply to HMRC for permission to do
so.
Where the seller retains the records, the seller must make
available to the purchaser information necessary for the purchaser
to comply with his duties under the VAT Act. If the seller fails to
make this information available, HMRC may disclose to the purchaser
information it holds on the transferred business that is needed by
the buyer to comply with its duties under the VAT Act. HMRC will
advise the seller of an intention to disclose information to the
purchaser and this will provide the seller with the opportunity to
make known any confidentiality issues.
Examples of the type of information that may need to be
divulged includes: details of the seller’s taxable turnover
in order to determine the purchaser’s liability to be
registered for VAT; or the number of completed periods of the
capital goods scheme in relation to a capital item.
VAT Information sheet 12/07 explains the changes in more
detail.
If you receive a request from a purchaser to disclose
information held by HMRC on the seller of a TOGC you must contact
CT&VAT Supply of Goods to obtain authorisation prior to giving
out any information. In addition to the seller’s details you
should provide, via the usual PG1 submission arrangements, details
of what information has been requested and why the purchaser has
been unable to obtain it from the seller.
Where any seller, whilst remaining responsible for the
records, entrusts the safekeeping of those records to a third
party, whether that third party is, for example, a storage
facility, an accountant, or the purchaser of the business, then the
seller must still honour his obligations to furnish information and
produce documents under Schedule 11 of VAT Act 1994. It would
appear sensible that each party to a transfer would seek assurance
from the other as to how access will be made available for as long
as it is needed.
Where a company is in administration following insolvency and
the company exits administration by way of a creditor’s
voluntary liquidation or dissolution, as is likely if its business
has been transferred to someone else, then the retention of records
will be governed by the Insolvency Regulations 1994. VAT Notice
700/56 refers.
