VAT on incorporation of a business


Despite the new dividend rules and the possible introduction of a new “look-though” entity many unincorporated businesses are still considering trading as a limited company. It is also important to consider the VAT implications of incorporation.

Where the new company carries on the same kind of business as the predecessor, the transfer of the trade and assets will normally be regarded as a transfer of a going concern (TOGC) and no VAT will be charged on the transaction. Further conditions are that there is no significant break in trading and the company must be VAT registered from its first day of trading.

Particular care is required where properties are transferred on incorporation where these are within the capital goods scheme or the option to tax has been exercised. We can of course assist you to make sure all tax implications are considered.


Should we keep the same VAT number?

It is possible for the new company to keep the same VAT number as the predecessor business when it registers for VAT. However, we would normally advise that the new company should apply for a new VAT registration number as retention of the old VAT number means that the new company takes over the potential VAT liabilities of the business, including penalties for VAT errors in the previous four years.