VAT and TOGC: How to Avoid Paying VAT on a Property Purchase
A smart way to buy commercial property or land—without paying 20% VAT upfront
When buying land or commercial property, 20% VAT can add a massive cost to your deal. But in some cases, you might not need to pay that VAT at all.
Enter the Transfer of a Going Concern (TOGC).
This special VAT rule can save you thousands—but only if the transaction is set up correctly.
Here’s what you need to know.What Is a TOGC?
A Transfer of a Going Concern happens when a business or property is sold as a continuing trading entity, not just as a one-off asset.
If HMRC agrees that the sale qualifies as a TOGC, no VAT is charged on the purchase.
That means:
- You don’t pay VAT upfront
- You don’t have to wait to reclaim it later
- It improves cash flow and avoids the need for extra finance
When Does TOGC Apply?
TOGC rules can apply if:
✅ You’re buying a commercial property or land
✅ The seller has opted to tax the property
✅ The property is currently let out to tenants (i.e. income-producing)
✅ You’re also VAT registered
✅ You plan to continue the same business activity (e.g. keep the tenants or use it in a similar way)
Example Scenario
You buy an office building that:
- Has a current tenant
- Is opted to tax
- Is producing rental income
Instead of paying VAT on the sale price, the whole deal may be outside the scope of VAT—if it qualifies as a TOGC.
Key Conditions You Must Meet
- Both buyer and seller must be VAT registered
- The buyer must continue the same kind of business (usually renting it out)
- No break in the letting – Tenancy must continue at completion
- The buyer must opt to tax before completion (and notify HMRC if required)
❗ If even one condition is missed, the seller must charge VAT—and you’ll need to fund it upfront.
When TOGC Doesn’t Apply
🚫 If the property is vacant or not producing income
🚫 If you’re planning to demolish it immediately
🚫 If the buyer isn’t VAT registered
🚫 If the buyer doesn’t opt to tax in time
Conclusion: Plan Ahead to Save Big
TOGC can be a powerful way to save on VAT—but only with the right setup and timing.
📞 Thinking of buying a commercial property?
Let’s make sure you qualify for TOGC and avoid unnecessary VAT costs.
