ACCA Advanced Taxation (ATX) Practice Exam

Under VAT implications, when is a transfer of a business treated as the transfer of a going concern (TOGC)?

1. If the business incurs losses

2. If the transferee is not VAT registered

3. If all four specified conditions are met

4. If it involves a change in trade

The correct answer is: If all four specified conditions are met

A transfer of a business is treated as a transfer of a going concern (TOGC) when all specified conditions set by VAT legislation are met. These conditions primarily ensure that the business being transferred is capable of being operated as a continuous entity by the transferee, thereby not resulting in a taxable supply for VAT purposes. The specified conditions for a TOGC include that the transfer must involve the sale of an entire business, the business must be an ongoing concern, both parties must be registered for VAT (or the transferee must be a VAT-registered entity that is going to continue the business), and the sale must include the assets necessary for the operation of the business. This treatment is important for avoiding VAT liabilities on the transfer and provides continuity for the business activities being transferred. If any of the conditions are not satisfied, the transfer may not qualify as a TOGC, leading to potential VAT implications on the transaction. The other choices do not represent the conditions necessary for a TOGC status, such as whether the business incurs losses, the VAT registration status of the transferee (as there must be a transfer to a VAT-registered entity operating the business), or a mere change in trade without fulfilling the appropriate criteria. Thus, simply meeting the conditions of a