You can transfer a VAT registration number if there’s a change of business ownership or legal status.
For example, if:
- you take over a company and want to keep using its VAT registration number; or
- your business changes from a partnership to a sole trader or becomes a limited company.
This means the business will keep the same VAT registration number.
Transferring The VAT Number
This can be done by completing a form VAT 68 and submitting it to HMRC along with the VAT 1 application for VAT registration – or within a maximum of 21 days if you do submit it with the VAT 1. Once the transfer of the registration has been allowed by HMRC, it cannot be revoked. HMRC will treat the form VAT 68 as the seller’s cancellation and transfer to you. They do not need to fill in the de-registration form VAT 7.
Before completing the transfer, ensure that you conduct a comprehensive review of the business’s VAT records to identify any potential liabilities or discrepancies. This due diligence can help you avoid unexpected tax bills.
Advantages of Retaining the VAT Number
There are some advantages to retaining the existing VAT number. You can: • retain existing invoices and stationary;
- administration during the changeover period is simplified;
- VAT return periods remain unaltered; and
- there is no disruption for supplies and customers checking the validity of a new VAT number.
Disadvantages of Retaining the VAT Number
There are some potential disadvantages to retaining the VAT number when you purchase a business because, in doing so, a business takes on all the VAT liabilities of the existing registration, and could be caught out by an assessment for mistakes made by the vendor up to four years ago. The procedure is, therefore, only suitable when the two parties are closely connected or when you are just changing the legal entity of the business.
A right to reclaim VAT overpaid on sales only belongs to the person who overpaid it. In Shendish Manor Ltd (LON/97//929 No 18474), this was held to be so even if the VAT number had been transferred; the transfer of a going concern (TOGC) provisions only transfer the right to repayment of input tax, not overpaid output tax.
However, in Pets Place (UK) Ltd (LON/95/2986 No 14642), the purchaser was held not to be liable for an assessment disallowing input tax to the vendor. Pets Place had taken over the VAT number and signed a VAT 68, but the latter referred only to paying VAT on supplies made by the vendor, i.e., to output tax, not to input tax that had been overclaimed.
Who retains the records? The seller of a business as a TOGC retains the records. However, where the purchaser takes on the seller’s VAT number, the seller is required to transfer the records to the purchaser, unless the seller needs to retain the records, in which case he may apply to HMRC for permission to do so.
Any special scheme, such as the flat rate scheme, annual accounting or a retail scheme, used by the vendor ceases at the date of the transfer and the purchaser has to reapply to use them. The purchaser will need to make a new option to tax on any opted property.
Paying VAT
The previous owner must cancel any direct debit that they have set up to pay their online VAT returns and the new owner must set up new direct debit instructions.
Practical Tip
If you buy a business or change the legal entity, you can retain the existing VAT number. This simplifies administration and retains the relationship with suppliers and customers; but you could be liable for any errors made by the previous owners.