Transfer of Business

Introduction

1.1 The Value Added Tax Act 1972 (VAT Act) provides that a transfer of ownership of goods, being the transfer to an accountable person of a totality of the assets or part thereof, of a business, even if that business or part thereof had ceased trading, where those transferred assets constitute an undertaking or part of an undertaking capable of being operated on an independent basis, is deemed not to be a supply for VAT purposes. Similar provisions apply as regards the transfer of goodwill or other intangible assets between accountable persons.

1.2 These provisions are important trade facilitation measures aimed at reducing compliance costs for traders involved in this type of transaction. However, traders are advised that when they are involved in a transfer of this type, particularly as an acquirer of a a totality of assets or part thereof of a business which might constitute an undertaking or part thereof capable of being operated on an independent basis, they should, in cases of doubt, check with their local Revenue District office before paying any VAT invoiced by the vendor in such circumstances. Where such a transfer is involved it is important to note that any VAT paid by a purchaser to a vendor in error will not be deductible as no supply is deemed to have taken place.

1.3 This leaflet does not refer to the transfer of a business by means of the transfer of the shares in a company. Such a supply is exempt from VAT in accordance with paragraph (i)(a) of the First Schedule to the VAT Act.

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What the law says

2.1 Sections 3(5)(b)(iii) and 5(8) of the VAT Act are the main provisions. The corresponding provisions are Articles 19 and 29 of the EU VAT Directive 2006. Sections12E(3),(7) and (10) provide for the Capital Goods Scheme adjustments. The text of these provisions, the legal definitions of the terms accountable person and taxable person in Section 1 and the text of Section12D of the Act, which provides for adjustments of tax for transfers which occurred prior to 1 July, 2008 where the transferor or transferee were not entitled to full deductibility, are set out in Appendix to this leaflet.

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What are transfers of business assets qualifying for the relief?

3.1 VAT law refers to the transfer of a totality of the assets, or part thereof, of a business. Where a business is transferred, the assets that may be transferred can normally be sub-divided as follows:

  • premises
  • employees
  • plant and machinery
  • stock
  • goodwill
  • intellectual property
  • debtors.

The classic transfer of a business will include the transfer of all seven. Some businesses may not have some of these items, for example, there may be no plant, machinery or stock where the business is a service business. The Courts have ruled that the relief does not cover the transfer of assets alone, such as the sale of trading stock.

3.2 A totality of the assets or part thereof must constitute an undertaking or part of an undertaking capable of carrying on an independent economic activity. The transfer, in order to qualify for the relief, must be made to another person in circumstances where that other person intends to apply those goods for the purposes of a taxable business.

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Circumstances in which the relief applies in relation to goods

4.1 The relief applies where an accountable person transfers a totality of the assets or part thereof of a business to another accountable person where the assets transferred constitute an undertaking or part of an undertaking capable of being operated on an independent basis and the assets transferred are intended to be used:-

  • to carry on the same or a similar taxable business,
  • for the purposes of the acquirer’s own taxable business, following the cessation of the transferor’s business or
  • to carry on a different taxable business in the premises using the assets acquired.

4.2 The relief applies even if the business or part of the business has ceased trading.

4.3 As stated above, the relief does not apply to the sale of stock-in-trade on its own. Neither do once-off sales of business assets qualify for the special VAT treatment. For example, the sale of an oil tanker by a garage owner who also delivers home heating oil is not a VAT-free supply under Section 3(5)(b)(iii). However, the sale of the entire home-heating oil distribution business which also includes an oil tanker would qualify for the relief.

4.4 The absence of any one of the component parts of the business will not automatically preclude the application of the provision to the transaction.

4.5 Where a person acquiring a business or part of a business has applied for but has not yet received a VAT registration number, the vendor should apply the provisions of Section 3(5)(b)(iii).

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Circumstances in which the relief extends to services

5.1 Section 5(8) provides that the transfer of goodwill or other intangible assets of a business, in connection with the transfer of the business or part thereof, or in connection with the transfer of goods qualifying for the relief :-

  • between an accountable person and a taxable person or
  • between a person who is not an accountable person and another person,

qualifies for the relief.

The purpose of the provision is to ensure that, where goodwill and intangible assets are transferred as part of the transfer of a business, the total transaction comes within the scope of the relief.

5.2 It should be noted that the term 'accountable person' does not include a person registered only for the purposes of accounting for intra-Community acquisitions or received Fourth Schedule services

Publican’s licence - concession

6.1 The transfer of a publican’s business with accompanying assets between two taxable persons, qualifies for the relief. Revenue treat the consideration charged by one accountable person to another for an agreement to extinguish a publican’s licence, even without the accompanying assets being sold, so that a new publican’s licence may be issued to that other accountable person, as coming within the ambit of section 3(5)(b)(iii).

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Transfer of an interest in a partnership or co-ownership

7.1 Where a taxable activity is carried out by a partnership and a partner sells out his/her interest in the partnership to a new or existing partner, section 3(5)(b)(iii) shall be applied to the sale.

7.2 In the case of a taxable co-ownership, Revenue regards the sale by a co-owner of his or her interest in a co-ownership as the transfer of a business to which section 3(5)(b)(iii) applies.

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Transfer of a business to a non-established person

8.1 The transfer of a business to a person who is not registered or entitled to register for VAT in the State is not covered by the relief. The transfer of the goods out of the State may benefit from the EU intra-Community supply or export provisions while the transfer or rights to intellectual property may qualify for zero rating under the Fourth Schedule to the VAT Act. The sale of debtors is not classified as a Fourth Schedule Service. It is open to the customer to apply for refund of VAT under the provisions of the 2008/9/EEC and 13th VAT Directives.

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Milk Quotas

9.1 A transfer of a milk quota between farmers, be they registered for VAT or not, does not give rise to a VAT liability in accordance with section 3(5)(b)(iii). The transfer of business rules apply even where the business has ceased trading.

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Transfers of property as part of a transfer of business or part thereof

10.1 Background

When considering whether the transfer of a property as part of the transfer of a business qualifies for the relief, traders should bear in mind that the rules on property transactions changed with effect from 1 July, 2008 and these are set out in detail in the VAT on Property Guide (April, 2008). Where the transfer, meaning the sale of a freehold or freehold equivalent of property, is subject to VAT and the transferee is an accountable person who is fully taxable for VAT and the property forms part of an amalgam of assets forming an undertaking capable of being operated on an independent basis, the relief at Section 3(5)(b)(iii) may apply.

10.2 Capital Goods Scheme (CGS) and transfer of a business

Where the transfer of a property in the course of a transfer of a business qualifies for the relief, there are special rules within the CGS to deal with such transactions. There are basically two main rules dealing with the transferee to enable him or her to operate the scheme. One applies where the transfer occurs during the period when the sale of the property would have been taxable but for the transfer of business relief (i.e. while the property was considered “new”). The second rule applies when the transfer of the property occurs outside this period i.e. when if it were supplied other than as part of a transfer of a business, the sale would have been exempt. There are also rules dealing with the transferor and these and further information are set out in the VAT on Property Guide (April, 2008)(as amended).

10.3 Transfer of property during the period when property is considered “new” (Section 12E(3) and (7))

Where a transfer of a property occurs in the course of a transfer of a business no VAT is charged on the sale of the property to the transferee. If this occurs during the period when a property is considered “new” (i.e. if the property was supplied at the time the transfer takes place it would be inherently taxable) then for CGS purposes:-

  • the transferor is treated as having made a taxable supply of the property;
    and
  • the transferee is deemed to have been charged the VAT that would have been charged but for the fact that relief for the transfer of business applied. The amount of tax that would have been charged is treated as the ‘total tax incurred’. The transferee must pay to Revenue the difference between this amount and the amount that would have been deductible if this amount of VAT had been charged on the supply of the property.

10.4 Transfer of property during the period when property outside the “new” period (Section 12E(10))

Where a transfer occurs outside the period where a property is considered “new” (i.e. if the property was sold at the time the transfer takes place it would be exempt from VAT) then the transferee essentially “steps into the shoes” of the transferor. The transferee takes over from the transferor and “inherits” the adjustment period of the property, i.e. if six intervals have elapsed then there will be fourteen intervals remaining in the adjustment period for the transferee. (The VAT life of a property is normally made up of twenty intervals. A Capital Goods Scheme interval is normally twelve months. Please refer to the VAT on Property Guide (April 2008))

10.5 Interaction of property provisions with Section 13A VAT Act 1972 (as amended)

Section 13A VAT Act 1972 (as amended) provides for the zero-rating of most supplies to exporters who qualify for authorisation under that provision. These supplies would include the sale of property to the exporter and construction services and other services and goods used by an exporter for the purpose of developing his/her business facility. Where, as a result of Section 13A, an exporter has had costs relating to the acquisition or redevelopment of a property zero rated – including refurbishment by the exporter as a tenant – then, for the purposes of the CGS, those inputs are treated as if Section 13A had not applied to them and as if the VAT had been charged at the rates appropriate to the goods or services concerned and fully deducted by the exporter. The exporter therefore has the same responsibility within the CGS in respect of capital goods acquired or developed and zero rated under a Section 13A authorisation as he would if the authorisation had not applied.

10.6 Transfers of let properties

Revenue accept that the concepts of 'undertaking' and 'business' includes the exploitation of tangible and intangible property for the purposes of obtaining income therefrom on a continuing basis and that the transfer of a let property is a transfer capable of qualifying for the relief. However, the relief only applies when the person acquiring the letting business is an accountable person in respect of the ‘business’ being acquired. For example, if the person acquires a letting business where there are lettings in place and the transferee can and does exercise the landlord’s option to be taxable in respect of those lettings, then section 3(5)(b)(iii) applies to such a transfer.

10.7 Transfers of property prior to 1 July, 2008 to or by a person not entitled to full deductibility

Section 12D of the VAT Act provides for special measures to deal with transfers of business which include property or interests which were transferred before 1 July, 2008 where either the transferor or transferee or both are not entitled to full deductibility on acquisition or development of the property. It deals with transfers of an interest of ten years or more in property in the context of a transfer of a business where one of the parties involved is not entitled to full deductibility. The purpose of the section is to limit by means of a clawback the opportunity for an accountable person who is not entitled to deduct all the VAT on his or her inputs, to obtain, using the transfer of business rules, an interest in such property without payment of VAT. The provision also reduces the extent of any trapped VAT by means of add-backs where the transferor was not entitled to full deductibility on the acquisition.

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Records

11.1 Where a business is transferred in accordance with section 3(5)(b)(iii) and the transferee operates the business under a different VAT number, the transferor will normally be required to retain in his/her possession all records for at least six years from the date of the last transaction, unless Revenue notify the person that retention is not required.

Credit Notes issued after a transfer of business

12.1 Where a transferor of a business issues an invoice to a customer and, subsequent to the transfer of the business, the goods are proved to be faulty and returned (or where a discount or rebate is due to the customer against the price originally charged for the goods), then technically speaking, the transferor is obliged to issue a credit note in respect of this transaction in accordance with Sections 10(3)(d) and 17(3)(b) of the VAT Act 1972, together with regulation 16 VAT Regulations 2006 (S.I. 548/06, amended by S.I. 272/07) .

12.2 However, on a concessional basis and on condition that the transferor had no tax liabilities outstanding in respect of the business or part thereof which had been transferred in accordance with Section 3(5)(b)(iii), Revenue are prepared to allow the transferee, rather than the transferor, to issue a credit note in respect of the transaction in question.

Costs incurred fulfilling outstanding obligations, e.g., warranties after a transfer of business

13.1 Where a transferor of the business supplies goods issued under warranty and, subsequent to the transfer of a business, the customer returns the goods to the transferee for repair/replacement, again technically speaking, the transferee is not entitled to recover VAT incurred on expenditure relating to the fulfillment of the warranty on the basis that this expenditure does not relate to any taxable supplies made by the transferee.

13.2 However, on a concessional basis and on condition that the transferor had no tax liabilities outstanding in respect of the business or part thereof which had been transferred in accordance with Section 3(5)(b)(iii), Revenue are be prepared to allow the transferee to claim input credit in respect of expenditure incurred by him/her in relation to the fulfilment of the warranties issued by the transferor.

Bad debts determined after a transfer of business

14.1 Where, as part of the transfer of a business in accordance with Sections 3(5)(b)(iii) or 5(8) of the VAT Act, the transferor of the business transfers debts that, subsequent to the transfer, are determined to be bad debts, there is no entitlement to bad debt relief. However, bad debt relief subject to the normal conditions is available in respect of any debts retained by the transferor that are not included in the transfer.

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VAT Credit in relation to services supplied

15.1 Section 12(1)(a)(iiia) of the VAT Act provides that input credit is allowable in respect of services, e.g. services of an auctioneer or solicitor, supplied to either party in connection with a transfer of goods in accordance with section 3(5)(b)(iii). In practice, input credit may also be taken in respect of such incidental services incurred in connection with the transfer of goodwill or other intangible assets in accordance with section 5(8) where the parties to the transaction are accountable persons. Credit may be taken by the transferor or transferee as appropriate.

Private or non-business use of property acquired under the transfer of business relief

16.1 Section 10(4D) of the VAT Act provides that where a property on which a credit would have been allowable but for the operation of Section 3(5)(b)(iii) is appropriated to private or non-business use, there is a consequent taxable supply of services during a period of 20 years that the property is used for private/exempt purposes. The amount on which VAT is chargeable is arrived at by dividing the cost incurred by the business by 20 and for any private or non-business use of the property during each two monthly taxable period the appropriate portion of one sixth of that amount is taxable.

16.2 Regulation 21B of the VAT Regulations 2006 (inserted by the VAT (Amendment) Regulations 2008) specifies the method to be used to identify the extent to which the goods are to be used for private or non-business purposes.

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Further Information

Enquiries regarding any issue contained in this Information Leaflet should be addressed to the Revenue District responsible for your tax affairs. Contact details for all Revenue Districts can be found on the Contact Details Page.

VAT Interpretation Branch,
Indirect Taxes Division,
Dublin Castle.

January 2010

Appendix

Relevant Legislation

Value-Added Tax Act 1972, as amended.

Section 3(5)(b)(iii):-

'(b) The transfer of ownership of goods -

(iii) being a transfer to a taxable person of a totality of assets or part thereof, of a business even if that business or part thereof had ceased trading, where those transferred assets constitute an undertaking or part of an undertaking capable of being operated on an independent basis, shall be deemed, for the purposes of this Act, not to be a supply of the goods ….'

Section 5(8)(a):-

'(a) The transfer of goodwill or other intangible assets of a business, in connection with the transfer of the business or part thereof, even if that business or that part thereof had ceased trading, or in connection with a transfer of ownership of goods in accordance with section 3(5)(b)(iii) by –

(i) a taxable person to another taxable person or a flat-rate farmer, or

(ii) a person who is not a taxable person to another person,

shall be deemed, for the purposes of this Act, not to be a supply of services.

(b) For the purposes of this subsection, 'taxable person' shall not include a person who is a taxable person solely by virtue of subsections (1A) and (2) of section 8'.

Section 8(1)(a)—meaning of accountable person

(1) A taxable person who engages in the supply, within the State, of taxable goods or services shall be an accountable person and shall be accountable for and liable to pay the tax charged in respect of such supply. In addition the persons referred to in section 4B(3) and subsections (1A), (2), (2A) and (8) shall be accountable persons. However a person not established in the State who supplies goods in the State only in the circumstances set out in paragraph (f) or (g) of subsection (1A) or supplies a service in the State only in the circumstances set out in subsections (1B) and (2)(aa) shall not be an accountable person.

Section 1(1)—definition of taxable person

taxable person” means a person who independently carries out any business in the State

Section 10(4D)—Private or non-business use of property where section 3(5)(b)(iii) applied to the acquisition

(a) The amount on which tax is chargeable in relation to a supply of services referred to in section 5(3B) in any taxable period shall be an amount equal to one sixth of one twentieth of the cost of the immovable goods used to provide those services, being—

(i) the amount on which tax was chargeable to the person making the supply in respect of that person's acquisition or development of the immovable goods referred to in section 5(3B), and

(ii) in the case where section 3(5)(b)(iii) applied to the acquisition of the immovable goods, the amount on which tax would have been chargeable but for the application of that section,

adjusted to correctly reflect the proportion of the use of the goods in that period.

(b) The Revenue Commissioners may make regulations specifying methods which may be used—

(i) to identify the proportion which correctly reflects the extent to which immovable goods are used for the purposes referred to in section 5(3B), and

(ii) to calculate the relevant taxable amount or amounts.

(Regulation 21 of the VAT Regulations 2006 (inserted by the VAT (Amendment) Regulations 2008) specifies the method to be used to identify the extent to which goods are used for private or non-business use)

Section 12 Deduction for tax borne or paid

(1)(a) In computing the amount of tax payable by him in respect of a taxable period, an accountable person may, insofar as the goods and services are used by him for the purposes of his taxable supplies or of any of the qualifying activities, deduct, subject to making any adjustment required in accordance with section 12D,—

(iiia) the tax charged to him during the period by other accountable persons in respect of services directly related to the transfer of ownership of goods specified in section 3(5)(b)(iii),

Section 12E—CAPITAL GOODS SCHEME

Section 12E(3)---TRANSFERS OF PROPERTY DURING THE PERIOD WHEN PROPERTY IS CONSIDERED “NEW”

(a) In relation to a capital good the number of intervals in the adjustment period during which adjustments of deductions are required under this section to be made, is—

(i) in the case of refurbishment, 10 intervals,

(ii) in the case of a capital good to which paragraph (c) or (d) of subsection (6) applies, the number of full intervals remaining in the adjustment period applicable to that capital good plus one as required to be calculated in accordance with the formula in subsection (7)(b), and

(iii) in all other cases, 20 intervals.

(b) In this section “total tax incurred” in relation to a capital good means—

(i) the amount of tax charged to a capital goods owner in respect of that owner's acquisition or development of a capital good,

(ii) in the case of a transferee where a transfer of ownership of a capital good to which section 3(5)(b)(iii) applies —

(I) where such a transfer would have been a supply but for the application of section
3(5)(b)(iii) and that supply would have been exempt in accordance with section 4B(2) or subsection (2) or (6)(b) of section 4C, then the total tax incurred that is required to be included in the copy of the capital good record that is required to be furnished by the transferor in accordance with subsection (10), and

(II) where such a transfer is not one to which clause (I) applies, then the amount of tax that would have been chargeable on that transfer but for the application of sections 3(5)(b)(iii) and 13A,

and

(iii) the amount of tax that would have been chargeable, but for the application of section 13A, to a capital goods owner on that owner's acquisition or development of a capital good.

(c) Where a capital goods owner acquires a capital good—

(i) by way of a transfer, being a transfer to which section 3(5)(b)(iii) applies other than a transfer to which subsection (10) applies, on which tax would have been chargeable but for the application of section
3(5)(b)(iii), or

(ii) on the supply or development of which tax was chargeable in accordance with section 13A,
then, for the purposes of this section, that capital goods owner is deemed to have claimed a deduction in accordance with section 12 of the tax that would have been chargeable—

(I) on the transfer of that capital good but for the application of section 3(5)(b)(iii), less any amount accounted for by that owner in respect of that transfer in accordance with subsection (7)(d), and

(II) on the supply or development of that capital good but for the application of section 13A.

(d) Where a capital goods owner supplies or transfers by means of a transfer to which section 3(5)(b)(iii) applies a capital good during the adjustment period then the adjustment period for that capital good for that owner shall end on the date of that supply or transfer.

Section 12E(7)

(a) Where a capital goods owner supplies a capital good or transfers a capital good, being a transfer to which section
3(5)(b)(iii) applies, other than a transfer to which subsection (10) applies, during the adjustment period in relation to that capital good, and where—

(i) tax is chargeable on that supply, or tax would have been chargeable on that transfer but for the application of section 3(5)(b)(iii), and

(ii) the non-deductible amount in relation to that capital good for that owner is greater than zero or in the case of a supply or transfer during the initial interval, that owner was not entitled to deduct all of the total tax incurred in accordance with section 12,

then that owner is entitled to increase the amount of tax deductible by that owner for the purposes of section 12 for the taxable period in which the supply or transfer occurs, by an amount calculated in accordance with the following formula:

(E x N) / T

where
E is the non-deductible amount in relation to that capital good, or in the case of a supply before the end of the initial interval the amount of the total tax incurred in relation to that capital good which was not deductible by that owner in accordance with section 12,
N is the number of full intervals remaining in the adjustment period in relation to that capital good at the time of supply plus one,
T is the total number of intervals in the adjustment period in relation to that capital good.

(b) Where a capital goods owner supplies a capital good during the adjustment period applicable to that capital good and where tax is not chargeable on the supply and where either—

(i) the total reviewed deductible amount in relation to that capital good is greater than zero, or

(ii) in the case of a supply before the end of the initial interval where the amount of the total tax incurred in relation to that capital good which was deductible by that owner in accordance with section 12 is greater than zero,

then that owner shall calculate an amount which shall be payable as if it were tax due in accordance with section 19 for the taxable period in which the supply occurs in accordance with the following formula:

(B x N) / T

where—
B is the total reviewed deductible amount in relation to that capital good, or, in the case of a supply to which subparagraph (ii) applies, the amount of the total tax incurred in relation to that capital good which that owner claimed as a deduction in accordance with section 12,
N is the number of full intervals remaining in the adjustment period in relation to that capital good at the time of supply plus one, and
T is the total number of intervals in the adjustment period in relation to that capital good.

(c) Where a capital goods owner supplies or transfers, being a transfer to which section 3(5)(b)(iii) applies, part of a capital good during the adjustment period, then for the remainder of the adjustment period applicable to that capital good—

(i) the total tax incurred,

(ii) the total reviewed deductible amount, and

(iii) all other definition amounts,

in relation to the remainder of that capital good for that owner shall be adjusted accordingly on a fair and reasonable basis.

(d) Where a transfer of ownership of a capital good occurs, being a transfer to which section 3(5)(b)(iii) applies, but excluding a transfer to which subsection (10) applies, and where the transferee would not have been entitled to deduct all of the tax that would have been chargeable on that transfer but for the application of section 3(5)(b)(iii), then that transferee shall calculate an amount as follows:

F G
where—
F is the amount of tax that would have been chargeable but for the application of section 3(5)(b)(iii), and
G is the amount of that tax that would have been deductible in accordance with section 12 by that transferee if section 3(5)(b)(iii) had not applied to that transfer,

and that amount shall be payable by that transferee as if it were tax due in accordance with section 19 for the taxable period in which the transfer occurs and for the purposes of this section that amount shall be deemed to be the amount of the total tax incurred in relation to that capital good that the transferee was not entitled to deduct in accordance with section 12.

Transfers of property where property is outside “new” period

Section 12E(10)

Where a capital goods owner transfers a capital good, being a transfer to which section 3(5)(b)(iii) applies and that transfer would have been a supply but for the application of section 3(5)(b)(iii), and where such supply would be exempt in accordance with section 4B(2) or subsection 6 or 6(b) of Section 4C then—

(a) the transferor shall issue a copy of the capital good record to the transferee,

(b) the transferee shall be the successor to the capital goods owner transferring the capital good and shall be responsible for all obligations of that owner under this section from the date of the transfer of that capital good, as if—

(i) the total tax incurred and the amount deducted by the transferor in relation to that capital good were the total tax incurred and the amount deducted by the transferee, and

(ii) any adjustments required to be made under this section by the transferor were made

and
(c) that transferee as successor shall use the information in the copy of the capital good record issued by the transferor in accordance with paragraph (a) for the purposes of calculating tax chargeable or deductible by that successor in accordance with this section for the remainder of the adjustment period applicable to that capital good from the date of transfer of that capital good.

Section 12D of VAT Act 1972, as amended— NB: does not apply to transfers of an interest in property which occurred on or after 1 July, 2008.

- Adjustment of tax deductible in circumstances where either the transferor or the transferee were not entitled to full deductibility

(1) For the purposes of this section—
'full year' shall be any continuous period of twelve months; 'interest' in relation to immovable goods has the meaning assigned to it by section 4.

(2) Where—

(a) a person makes a transfer of an interest in immovable goods in accordance with section 3(5)(b)(iii), and
(b) but for the application of that section, tax would have been chargeable on the transfer, and the person (referred to in this section as a 'transferor') was entitled to deduct part of the tax charged on the most recent purchase or acquisition of an interest in, or the development of, the immovable goods subject to that transfer,

that transferor shall, for the purposes of section 12, be entitled to increase the amount of tax deductible for the taxable period within which the transfer is made by an amount calculated in accordance with the following formula:

(T TD) x (Y N) / Y
where—
T is the tax chargeable on that most recent purchase or acquisition of an interest in, or that development of, the immovable goods,
TD is the tax that the transferor was entitled to deduct on that most recent purchase or acquisition of an interest in, or that development of, the immovable goods,
Y is 20 or, if the interest when it was created in the immovable goods being transferred was for a period of less than 20 years, the number of full years in that interest, and
N is the number of full years since the interest was created or, if the goods were developed since that interest was created, the number of full years since the most recent development:
but if that N is greater than that Y, such an amount calculated shall be deemed to be nil.

(3) Where a transferor acquired an interest in immovable goods as a result of a transfer in accordance with section 3(5)(b)(iii) and the transferor did not develop those immovable goods since the acquisition then, for the purposes of subsection (2), the amount by which that transferor shall be entitled to increase the amount of tax deductible, in accordance with section 12, for the taxable period in which the transferor transfers those goods, shall be calculated in accordance with the following formula:

A x (Y N) / Y
where—
A is the amount which the transferor was required to calculate and reduce his or her deductible amount by, in accordance with subsection (4), when the transferor acquired the interest in those goods,
Y is 20 or, if the interest when it was created in the immovable goods being transferred was for a period of less than 20 years, the number of full years in that interest, and
N is the number of full years since the interest was created or, if the goods were developed since that interest was created, the number of full years since the most recent development:
but if that N is greater than that Y, such an amount calculated shall be deemed to be nil.

(4) Where a person receives an interest in immovable goods as a result of a transfer and the person would not have been entitled to deduct all the tax that would have been chargeable on the transfer but for the application of section 3(5)(b)(iii), that person shall calculate an amount which shall be payable as if it were tax due by that person in accordance with section 19 for the taxable period within which the transfer was made, and that amount shall be calculated in accordance with the following formula:

(T1 TD1) x (Y N) / Y
where—
T1 is the amount of tax that would have been chargeable on the transfer if section 3(5)(b)(iii) did not apply,
TD1 is the amount of tax that would have been deductible by the transferee if section 3(5)(b)(iii) had not applied to the transfer,
Y is 20 or, if the interest when it was created in the immovable goods being transferred was for a period of less than 20 years, the number of full years in that interest, and
N is the number of full years since the interest was created or, if the goods were developed since that interest was created, the number of full years since the most recent development:
but if that N is greater than that Y, such an amount calculated shall be deemed to be nil.

(5) This section does not apply to a transfer of an interest in immovable goods which occurs on or after 1 July 2008.

Regulation 21B VAT Regulations 2006 (inserted by VAT (Amendment) Regulations 2008 (S.I. 238/2008) -The supply of services comprising the use of business assets for private or non-business purposes

21B. (1) In this Regulation ‘private use proportion’ means the proportion which correctly reflects the extent to which immovable goods are used for private or non-business purposes in the relevant taxable period.

(2) Where section 5(3B) of the Act applies the private use proportion shall be calculated in accordance with the following formula:

A / B
where—
A is equal to the floor area of that part of the immovable goods that is used for private or non-business purposes in the relevant taxable period, and
B is equal to the total floor area of those immovable goods.

(3) The amount on which tax is chargeable in relation to the supply of services referred to in section 5(3B) of the Act in any taxable period shall be calculated in accordance with the following formula:

(C x D) / (20 x 6)
where—
C is the amount on which tax is chargeable on the acquisition or development of the immovable goods,
D is the private use proportion calculated in accordance with the formula in paragraph (2).

(4) The rate of tax applicable to the supply of services referred to in paragraph (3) is the rate specified in section 11(1)(a) of the Act.

EU VAT Directive 2006

Corresponding provisions in EU law are in Article 19 of the EU VAT Directive 2006 as follows:-
'In the event of a transfer, whether for consideration or not as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and that the person to whom the goods are transferred is to be treated as the successor to the transferor....'.
Article 29 of the Directive states that, as follows:
'Article 19 shall apply in like manner to the supply of services'.

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