VAT on commercial property

TOGC Conditions: A Checklist for Property Transactions

PropertyVAT Team · Updated 21 October 2026 · 3 min read

TOGC treatment is worth real money — no VAT at completion, and no stamp duty on VAT that is never charged. It is also binary. The conditions are either met or they are not, and discovering a failure after exchange is expensive.

Use this as a structured conversation with your adviser, not as a substitute for one.

The core conditions

Four of the six sit substantially with the buyer. That is the single most useful thing to know about TOGCs: it is mostly your job, on a deadline.

Working through them

1. Is there a business, or just a building?

For property, a TOGC usually means a property rental business. There must be tenants, or at least genuine letting activity, transferring to the buyer.

A vacant building with no lettings generally has no business to transfer. Neither, usually, does a property that has never been let.

2. Will the same kind of business continue?

The buyer must intend to carry on a property rental business, not something else.

This fails most often when a buyer purchases a let property intending to occupy it. The lettings end on completion; the business does not continue.

3. Is the buyer VAT registered?

Registration must be in place, or arise as a result of the transfer. For a new SPV, that means starting registration early — it takes weeks, not days.

4. Has the buyer opted to tax, and notified HMRC in time?

This is the condition that fails most often.

Where the seller has opted to tax, the buyer generally needs their own option, notified to HMRC by the relevant date. Two things make this fragile:

• The seller's option does not transfer to the buyer. Many buyers assume it does.
• HMRC acknowledgement is not instant, and options are not normally backdated.

Start it the week the deal is agreed.

5. Is there a break in trading?

The business should pass as a continuing concern. A gap between the seller ceasing and the buyer starting can undermine the treatment.

6. Is the option disapplied?

In certain circumstances an option to tax can be disapplied, which can affect the analysis. This is technical and genuinely needs an adviser.

The situations that need extra care

• Sale to the sitting tenant. The letting business may end rather than continue, which can take the transaction outside TOGC treatment.
• Sale and leaseback. What is transferred may not be the business it appears to be.
• A quick onward sale. If the buyer intends to flip rather than let, the "continuing business" test is in doubt.
• Partly let buildings. More complex, and the treatment may differ across parts.
• Development sites. Often no letting business exists at all.

Protecting yourself in the contract

Even a well-advised TOGC can fail on a late change of facts. The contract should deal with it:

1. State clearly that the parties intend TOGC treatment.
2. Set out what happens if HMRC treats the sale as standard-rated — who pays the VAT, and when.
3. Deal with whether completion can move if the position changes.
4. Require the buyer to confirm their option to tax and notification before completion.

And have a funding plan anyway

The buyers who get hurt are not the ones whose TOGC failed. They are the ones whose TOGC failed and who had budgeted on it succeeding.

If the deal carries a realistic chance of 20% appearing at completion, know in advance where that money would come from.

This guide is general information, not tax advice. TOGC treatment is highly fact-specific — take specialist VAT advice before exchange.