In Robert Cross v HMRC8 the FTT concluded that on the transfer of a business as a going concern (TOGC), the right to reclaim overpaid output tax passed to the transferee.


The appellant, a sole proprietor, transferred his retailing motor vehicle business in May 1985 to an “off-the-shelf” company, which he renamed R J Cross Limited (the Company). The appellant became the majority shareholder in the Company. All the employees, stock, physical assets, outstanding contractual arrangements, and the appellant’s VAT registration number were transferred to the Company.

The transfer qualified as a TOGC, but was supported by minimal documentation. No assets or liabilities were expressly included or excluded in the transfer documents. On 23 March 2009, the Appellant’s representatives submitted a Voluntary Disclosure to HMRC in relation to: (1) VAT overpaid by the appellant as a sole proprietor prior to the TOGC, and (2) overpaid VAT by the Company following the transfer. This disclosure was for a total sum of £139,842, which HMRC initially agreed. Later, however, HMRC reversed its position and issued recovery assessments. The Appellant appealed these assessments to the FTT.

HMRC argued that the appellant had no right to make a claim as those rights had been transferred to the Company at the point of the TOGC. The appellant argued that when his business was transferred in 1985, there was no right to make a claim for overpaid VAT (this right arose on 1 January 1990, pursuant to section 24 of the Finance Act 1989) and that he could not have known of the position at that time. He argued that the right to claim remained vested in him as it was he who had, as a matter of fact, made the overpayments of VAT. He argued that it would only be if he had expressly transferred his right to claim that such a right would move to the Company.


Whilst accepting that the appellant had not contemplated the possibility of any repayment of output tax at the time of the transfer, the FTT did not agree with the appellant that as a consequence the right to claim had not passed to the Company. Agreeing with HMRC, the FTT found that in circumstance of a TOGC, the position was that everything is transferred (including rights to make claims) unless specified to the contrary. It was for this reason that such transfers typically involve detailed documentation.

Under Regulation 4(8) of the 1980 Regulations, the transferee inherits all that has been done in the name of the transferor. Therefore all of the tax paid or accounted for by the transferor (the appellant in this case) was to be treated as paid or accounted for by the transferee (the Company). The FTT determined that in this case, the transferee of the TOGC should be treated as the “person”, for the purposes of section 80 VATA, who had accounted for the output tax. Thus it was held on these facts that only the Company was entitled to make a claim for repayment and the appellant’s appeal was dismissed.


The decision provides useful confirmation of the position of VAT claims following a TOGC and the importance of clarity in the wording of the documentation which gives effect to the transfer in respect of rights which are known to exist, as well as those which may be found to exist after the time of transfer.

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