Usually not. When a salon is sold as a going concern to a buyer who carries on the same business, the sale is normally treated as a transfer of a going concern, which is outside the scope of VAT.
HMRC’s rules on transfers of a going concern are in VAT Notice 700/9. They are mandatory: if the conditions are met, the sale is outside the scope of VAT, and you cannot opt out.
The main conditions
- The assets are sold as part of a business, not as a pile of equipment.
- The buyer intends to carry on the same kind of business with them.
- If you are VAT-registered, the buyer is already registered, is required to register as a result of the transfer, or has registered voluntarily by the date of the transfer. Applying afterwards is not enough, which catches out many small salon buyers trading below the threshold.
- There is no significant break in trading before or after the sale.
When it goes wrong
If a buyer plans to turn the salon into something else, or the salon closes for weeks before completion, the conditions may not be met and VAT could be due on the price. Agree the VAT treatment in the sale contract and check it with your accountant.
Sources
- HM Revenue & Customs, Transfer a business as a going concern and VAT (VAT Notice 700/9) gov.uk