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Want to zero-rate the sale of your business? Make sure you meet these four requirements first

by , 28 October 2013
When you sell your business as a going concern, you can rate the sale as a zero-rated transaction and avoid Vat. But only IF you meet the following important criteria...

There are certain requirements you must meet if you want to zero-rate the sale of your business.

Do you know what these requirements are?

Here's a checklist of the criteria you must meet to zero-rate the sale of your business

#1: Both the buyer and the seller must be registered Vat vendors. And you must put both Vat registration numbers in the contract.

#2: 'The business must be sold as a going concern. All the assets relevant to the business must go with the sale and the business must be engaged in income earning activities as of the date of transfer of ownership,' says the Practical Vat Loose Leaf Service.

#3: Either the whole business must be sold, or alternatively, the sale must involve a section of the business that's capable of separate and independent operation.

#4: Both the buyer and the seller must agree in writing that the business is being sold as a going concern and at the zero-rate.

The contract must contain the words 'the supply is of a going concern, Vat at the zero-rate will be levied.'

If you fail to meet any one or more of the criteria listed above, you must levy the sale of your business at the standard rate of Vat (14%).

The Loose Leaf Service cautions that this can cause difficulties for the buyer who must now pay 14% Vat extra and wait for it to be refunded.

The bottom line: You must meet ALL four of the above criteria to zero-rate the sale of your business.

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Want to zero-rate the sale of your business? Make sure you meet these four requirements first
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