Are you in the Bed and Breakfast industry, in which you own a B&B, and now wish to sell it?
If so, then you must charge VAT... BUT you can ZERO RATE it!
Here are 6 requirements to sell your business as a going concern at the zero rate...
You sell the entire business, or part of it that's a stand-alone business.
You must sell all the assets necessary to run the business.
The business must be operational and income-earning at the time of selling. It CAN'T be dormant or a new business that hasn't started operating yet.
60% of VAT vendors get their zero rating wrong!
SARS knows the main problems many VAT vendors have with zero rating. These include:
· Not knowing what goods/services are at the zero rate;
· Not knowing how to levy VAT correctly on zero-rated goods;
· Not understanding the difference between zero-rated goods and exempt supplies;
· Not having the correct documentation to prove the zero rating to SARS; and
· Not knowing the one mistake you can make to lose your zero rating when exporting goods.
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The sale agreement must say that the business is being sold as a going concern at the zero rate.
In other words, both parties must agree, IN WRITING, that the business is being disposed of as a going concern.
The sale agreement must be in writing.
Both parties, namely the supplier and the purchaser, must be registered for VAT.
At the end of the day, this entire transaction ends up with no additional VAT going to SARS, and so the VAT Act provides for it to be zero-rated.
This, in turn, puts major relief on the purchaser's cash flow, which can really help with your sale (as it takes away the time lag between paying the VAT and then claiming it back from SARS).
*Those were 6 requirements to sell your business as a going concern at the zero rate.
To learn more on B&Bs and VAT compliance with regard to them, go to chapter B07: Bed and Breakfasts
in your Practical VAT Loose Leaf Service
If you don't already have this invaluable resource, then click here
now to get hold of it.