Some creative business owners get a little carried away each time they have a new business idea and decide to form a new limited company for every venture. Whilst not always a bad thing to keep each business independent, it can have some potential tax pitfalls to navigate, especially when you start moving parts of the business from one company to another.
If you’re selling your agency, buying a client book, moving your freelance business into a limited company, or reshuffling how your creative ventures are structured, you might stumble across something called Transfer of a Going Concern (TOGC).
TOGC is a special set of VAT rules. And if you get them right, they can be extremely helpful. If you get them wrong… well, HMRC do enjoy sending surprise VAT bills.
Let’s break it down in a way that actually makes sense.
A TOGC happens when you sell or transfer a business that is still ‘alive’ — meaning it’s trading, has customers, has assets, and is capable of carrying on without interruption.
Common scenarios for creatives:
Where a TOGC applies, you don’t charge VAT on the sale, even if you normally would.
That’s the big win.
HMRC want business sales and business restructures to be smoother.
If every business sale had to attract VAT:
So TOGC exists to keep things clean and cash-neutral.
But HMRC only allow this treatment if certain conditions are met.
For the transfer to qualify as a TOGC, all of the following must be true:
Not just a laptop and a few Adobe licences — it must be something that looks like a functioning business or distinct part of a business.
So if you run a design studio, the buyer must be planning to run… a design studio.
Not a restaurant.
A short pause to sort admin is fine.
A six-month hiatus while you “figure things out” is not.
then the buyer must register from the date of transfer.
If it’s a genuine TOGC and all conditions are met, VAT must not be added — adding VAT breaks the TOGC treatment and can create new VAT liabilities.
The most common scenario for creatives.
If you move your ongoing business (clients, brand, assets) into your new company, that can be a TOGC — meaning no VAT to charge on the transfer of assets.
If a buyer purchases all (or a defined part) of the business capable of operating independently, TOGC can apply.
Where one business acquires another’s full operation.
For example:
If what’s being sold is just a list, it may not qualify as a TOGC unless it clearly forms part of an operational business.
This area gets messy fast — always worth getting advice.
If the transfer qualifies for TOGC, you must not charge VAT.
If you do, HMRC treat the VAT as incorrectly charged and may not allow the buyer to reclaim it.
If you buy a business generating VAT-able turnover and crossing the threshold (£90,000 in 2025), you must be VAT-registered from day one — no grace period.
This is common among creatives wanting different brands or creative ventures.
If HMRC think you’ve artificially separated businesses to avoid VAT registration, they can force retrospective VAT registration.
And yes… they do investigate this quite often.
A TOGC can prevent big VAT outflows and inflows — useful in acquisitions where money is tight.
Even without VAT, asset transfers can still attract other taxes or legal requirements.
You may need a valuation for:
This valuation forms the basis of the transfer price.
Assets transferred under TOGC still have corporation tax implications — especially if passed between your own companies.
If you think your situation might be a TOGC:
Heads of terms + asset list + continuity of trade.
Clients, branding, staff, equipment, IP, WIP, contracts.
Check turnover triggered by the transfer.
Even a short break that feels harmless can disqualify a TOGC.
It must be handled correctly in the sales contract, not guessed afterwards.
TOGC isn’t the most glamorous topic but for creative agencies, designers, video producers, and freelancers shifting into limited companies, buying a client book, or selling a business, it can have a huge impact.
Handled correctly, it keeps VAT out of the way and avoids painful surprises.
Handled badly, it can result in HMRC assessments, penalties and sleepless nights.
If you're planning a restructure, merger, or sale — or you’re simply unsure whether moving your business into a new company counts as a TOGC — it’s worth getting bespoke advice before you sign anything.
If you'd like help, why not book a free consultation here.