Costs, SDLT and tax
The SDLT Saving a TOGC Delivers
PropertyVAT Team · Updated · 3 min read
The case for pursuing TOGC treatment is usually made on cash flow: no 20% to find at completion. That argument is real but incomplete, because the VAT was coming back anyway.
The durable argument is the stamp duty.
Why stamp duty is the permanent saving
SDLT is calculated on the VAT-inclusive consideration. So where VAT applies, you pay stamp duty on the price plus the VAT.
- The VAT is recovered through your VAT return, typically within one to three months
- The stamp duty on that VAT is never recovered, by anyone, ever
A successful TOGC takes the transaction outside the scope of VAT. No VAT in the consideration means no stamp duty on it.
The arithmetic at different sizes
Because the top non-residential SDLT band is 5%, each pound of VAT above the threshold costs roughly 5p in unrecoverable stamp duty.
| Purchase price | VAT at 20% | Extra SDLT if VAT applies | Saved by a TOGC |
|---|---|---|---|
| £500,000 | £100,000 | ~£5,000 | ~£5,000 |
| £1,000,000 | £200,000 | ~£10,000 | ~£10,000 |
| £2,500,000 | £500,000 | ~£25,000 | ~£25,000 |
| £5,000,000 | £1,000,000 | ~£50,000 | ~£50,000 |
| £12,000,000 | £2,400,000 | ~£120,000 | ~£120,000 |
Rates and thresholds change, so confirm the current position before relying on these figures. The shape holds regardless.
Setting it against the cost of advice
On a £5m let investment, a TOGC saves around £50,000 of permanent stamp duty, plus the cost of funding £1m for a quarter.
Specialist VAT advice on whether the conditions are met is a small fraction of that. The economics of taking advice are not close.
The expensive outcome is not paying for advice. It is assuming a TOGC works, budgeting on that basis, and discovering at completion that it does not.
The full comparison
On a £5m opted let investment:
| TOGC succeeds | TOGC fails | |
|---|---|---|
| VAT at completion | £0 | £1,000,000 |
| Capital tied up for 1–3 months | None | £1,000,000 |
| Financing cost if bridged, ~60 days | None | ~£18,000 plus fees |
| SDLT consideration | £5,000,000 | £6,000,000 |
| Extra SDLT | £0 | ~£50,000, permanent |
| Total cost of failure | — | ~£68,000, of which £50,000 never comes back |
Where the saving is available
TOGC generally requires a property letting business to transfer and continue. So it is realistically available on:
- Let commercial investments with tenants in place
- Single-let industrial and logistics assets
- Multi-let offices and retail parades transferring as going concerns
- Trading businesses with property — hotels, pubs, forecourts
It is generally not available on:
- Vacant buildings with no letting business
- Development land with no income
- New buildings bought from the developer
- Purchases where you intend to occupy rather than let
Do not let the saving distort the decision
Two cautions.
Do not construct a TOGC that is not there. The conditions turn on facts. An arrangement engineered to look like a going concern, without the substance, is a poor foundation for a six-figure tax position.
Do not budget on it succeeding. The conditions are tested at completion, and facts change — a tenant vacates, an option is notified late. Price and fund on the basis that VAT may be payable, and treat a successful TOGC as upside.
That way the saving is a benefit rather than a dependency.
This guide is general information, not tax advice. SDLT rates change and TOGC treatment is fact-specific — take specialist advice before exchange.
Frequently asked questions
- How much stamp duty does a TOGC actually save?
- Roughly 5% of the VAT that would have been charged, on any consideration above the top SDLT threshold. On £1m of VAT that is around £50,000, permanently saved.
- Is the VAT saving not the bigger benefit?
- In cash terms at completion, yes. But the VAT would have been recovered within one to three months. The stamp duty on it would never have been recovered at all.
- Does this justify the cost of TOGC advice?
- On most let investment purchases, comfortably. Specialist VAT advice costs a fraction of the stamp duty at stake on a seven-figure transaction.
- Does the saving apply in Scotland and Wales?
- The principle applies under LBTT and LTT too, since VAT forms part of the chargeable consideration in each. The rates differ, so the arithmetic does.
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