Chapter: 2 - Inheritance Tax Mitigation: The Basics

Value Added Tax

2.14.4

Just as for SDLT, a gift pure and simple should have no VAT implications.  But if the subject-matter of the gift forms part of a VAT registered business and involves the removal of one or more assets from that business and those assets are land, there is a liability on the business to pay VAT at 20% (17.5% before 4 January 2011, though 15% from 1 December 2008 to 31 December 2009) on the market value of the asset (VATA 1994 Sch 4 para 5).  For example, a gift by her parents to their daughter on her marriage of one of a number of holiday cottages would trigger an unexpected VAT liability on the parents.  The only way that this consequence could be avoided might be to have the whole business given away and to arrange things such that the ‘transfer of a going concern’ provisions apply so as to take the transaction outside the scope of VAT.