ACCA Advanced Taxation (ATX) Practice Exam

Which of the following is a condition for the transfer of a going concern (TOGC)?

1. Change in ownership must occur after the transfer

2. Significant break in trade before or after purchase

3. No change in trade during the transfer

4. Transferee must be operational for 6 months prior

The correct answer is: No change in trade during the transfer

The condition for the transfer of a going concern (TOGC) that is considered correct is that there should be no change in trade during the transfer. This means that the business being transferred must continue its operations without interruption, ensuring the continuity of its activities. The essence of a TOGC is to allow for a seamless transition where the buyer can take over the business in its operational state without any significant disruption, thereby preserving its value and ongoing functions. In contrast, other conditions do not align with the criteria for a TOGC. For instance, a change in ownership occurring after the transfer would not facilitate the continuity central to a TOGC. A significant break in trade either before or after the purchase undermines the entire purpose of the TOGC because it disrupts the business operations, potentially affecting its ongoing viability. Lastly, while operational history can be relevant in some contexts, requiring the transferee to have been operational for six months does not directly relate to the conditions governing a TOGC. Instead, it focuses more on the transferee's previous business status rather than ensuring continuity during the transfer itself.