20. Transfers, etc. deemed not to be supplies

Summary

This section deals with transfers and disposals that are deemed not to be supplies of goods. For example, the transfer of ownership of a business – in whole or in part – from one accountable person to another is deemed not to be a supply of goods and so is not taxable. Other cases covered in this section are changes of ownership of goods as security for a loan, transfers by a finance company on completion of a hire purchase agreement and some disposals of goods by insurance companies.

Details

(1) The transfer of ownership of goods by a finance company to the purchaser on completion of a hire-purchase agreement is not a supply of goods. This is the legal transfer. The actual handing over of the goods is a supply – see section 19(1)(c).

(2)(a) Transfers of ownership of goods as security for a loan or debt are deemed not to be supplies of goods.

(2)(b) Transfers of ownership of goods, where the goods are held as security upon repayment of a loan, are deemed not to be supplies of goods.

(2)(c) The transfer of assets of a business to an accountable person is deemed not to be a supply of goods where the assets constitute an undertaking or part of an undertaking that can be operated on an independent basis. This applies even if the business has ceased trading. Note that there is a mirror provision for services, under which the transfer of goodwill or other intangible business assets is not a supply of services – see section 26.

(3) The disposal of goods acquired from an insured person by an insurance company in connection with the settlement of an insurance claim, in cases where the insured person did not get deductibility for VAT incurred by him/her on the purchase of the goods, is not a supply of goods. Note that where these goods are acquired by a taxable dealer under the margin scheme – see section 87 – they count as margin scheme goods.

Relevant Date: Finance Act 2019