The First-tier Tribunal has restated a rule every acquisition file should already know. In Chandra Bahadur KC v HMRC [2026] UKFTT 1300 (TC), released mid-September 2026, the Tribunal dismissed an appeal against compulsory VAT registration after a takeaway changed hands from a dissolved company to a sole trader. The seller had never been on the VAT register. That fact did not save the buyer.
For trade purchases, family successions, SPV hives and PE roll-ups, KC is the statute working as written: transfer of a going concern from a taxable person pulls the transferee onto the register from the transfer date — whether or not anyone filed a VAT1, and whether or not the buyer believed post-completion turnover would stay under the threshold.
What the Tribunal decided
Mr KC took over the Cardiff takeaway previously run by Wok to Box Limited (his daughter’s company) when that company was dissolved on 12 November 2019 — same premises, trading name and activity, no material interruption. HMRC later registered him for VAT and upheld that decision on review in 2024. He appealed under section 83(1)(a) VATA 1994.
The Tribunal’s core findings were blunt:
- There was a transfer of a going concern on 12 November 2019.
- Wok to Box Limited was a taxable person because its taxable supplies in the year before transfer exceeded the then £85,000 registration threshold — even though the company had never registered.
- Paragraph 1(2) of Schedule 1 VATA 1994 therefore made Mr KC liable to register at the transfer date.
- The paragraph 1(3) exception (expected post-transfer supplies below the relevant figure) failed for want of contemporaneous evidence that turnover was expected to fall.
- HMRC’s effective date was varied by one day to the actual transfer date of 12 November 2019. Appeal dismissed.
Claritax’s case note and VATupdate’s summary pick up the same three hinges: continuity, taxable-person status without registration, and the narrowness of the expected-turnover escape.
“Never VAT-registered” is not a diligence answer
Section 3(1) VATA defines a taxable person as someone who is, or is required to be, registered. The Tribunal applied that without mercy. Wok to Box Limited’s online-platform sales alone — Just Eat, Uber Eats, Deliveroo, Hungry House, Kukd.com — crossed the threshold in September 2017 and stayed above it through dissolution. After ADR adjustments, HMRC still held £86,125.99 against the £85,000 line. Mr KC did not dispute the numbers; he simply did not know them.
HMRC does not need the seller’s VAT certificate. It needs sales evidence — increasingly from platforms, card acquirers and marketplaces, not the seller’s spreadsheet. A buyer who only asks “are you VAT-registered?” has asked the wrong question. Ask instead:
- What were taxable supplies in each of the last 12 months before completion?
- Which channels (till, card, marketplace, cash) sit outside the seller’s books?
- Has HMRC already issued information notices to platforms under the business name or premises?
- If the seller should have been registered and was not, what exposure travels with the trade?
Notice 700/9 still frames TOGC for the supply treatment of the transfer itself. KC is about the registration consequence under Schedule 1 — a different knife. Confusing the two is how clean SPA warranties become expensive assessments years later. Section 49 VATA reinforces the same logic: the transferee is treated as having carried on the business before as well as after the transfer.
Continuity is a facts test
The Tribunal listed the classic markers: same premises, same activities, same trading name, no material interruption, and tax returns showing the company then the individual trading from the same address. That was enough. On small deals the checklist is still under-worked:
- Premises and leases — who holds the lease before and after? A pure asset strip with a dark period can break continuity; a soft handover rarely does.
- Trading name and customer contracts — marketplace accounts, domain, Google Business Profile, loyalty apps.
- Staff and TUPE — continuity of workforce supports the “same business” narrative HMRC already likes.
- Banking and merchant IDs — if takings never stop flowing, interruption is hard to prove.
- Company dissolution vs share sale — KC was dissolution-plus-sole-trader. A share purchase leaves VAT history in the company; a trade-and-assets deal can put the buyer on the hook under paragraph 1(2). Structure choice is not neutral.
Paragraph 1(3) needs evidence at the transfer
Mr KC said that if he had known he was treated as registered, he would have deregistered because he expected lower turnover. The Tribunal treated that as irrelevant without evidence at the time of transfer that supplies in the following year were expected to stay below the relevant figure.
Board-level control points: investment-committee and SPA forecast packs should address VAT registration liability on TOGC; if the plan is genuinely sub-threshold, document why (site closure, lost contracts, channel exit) and keep the pack with the completion file; do not rely on hindsight; and diary the 30-day notification duty under paragraph 7 Schedule 1 — HMRC can register you whether you notify or not, effective from the transfer date.
Current figures live on GOV.UK VAT registration thresholds. They move; the structure of the Schedule 1 tests does not.
Platform data raises the temperature
The evidential spine of KC was intermediary sales data covering December 2015 to March 2022, later refined in ADR — not a full set of company ledgers. HMRC fixed transfer at dissolution; the threshold analysis still held for any 2019 transfer date in the window he offered.
Diligence must therefore include marketplace and card data, not only management accounts. Sellers who ran under the radar are precisely where HMRC third-party data is strongest. Open years after a quiet trade transfer are not closed by silence: HMRC registered Mr KC years after the 2019 transfer, and the decision under appeal landed in 2024. Forced registration from the transfer date can stack output tax and related penalties — budget for that in warranty and escrow design.
ICAEW TOGC materials and the CIOT technical library remain the practitioner baselines; KC is the FTT reminder that “unregistered seller” is a fact pattern, not a defence.
CFO lock-list before the next trade purchase
Treat every trade-and-assets or informal succession as a VAT registration event until proved otherwise:
1. Map the taxable person — was the transferor registered or required to be? Pull 12 months of channel-level supplies.
2. Stress-test TOGC continuity — premises, name, staff, customers, interruption period. Document breaks deliberately if you intend a new start.
3. File the paragraph 1(3) evidence if you need it — contemporaneous forecasts, not post-hoc narrative.
4. Diary the 30-day notify and HMRC registration follow-up; do not wait for a 2024-style letter about a 2019 deal.
5. Align SPA warranties — VAT registration status, threshold history, platform accounts, open enquiries, and TOGC conditions for the supply (Notice 700/9) as a separate track from Schedule 1 liability.
6. Price the open years — forced registration from transfer can reopen output tax and related exposures.
7. Standardise the PE workpaper — successive bolt-ons under one brand multiply the same risk; put a VAT TOGC checklist in the deal playbook.
8. Close the agent loop — once registered, digital VAT filing and agent authorisation are operating controls (Agent Update 147).
Bottom line
KC is not new law. It is a clean application of VATA sections 3 and 49 and Schedule 1 to a common UK fact pattern: family company dissolves, individual carries on the shop, nobody files a VAT1, years later HMRC reconstructs supplies from platform data and registers from day one of the transfer.
The CFO error is treating “seller not VAT-registered” as comfort. It is a red flag. Taxable-person status follows the threshold, not the certificate. TOGC continuity follows the facts on the ground, not the SPA recital. And the expected-turnover escape follows evidence locked at completion, not optimism locked in a witness statement five years later.
If a live deal file still has a blank where the seller’s 12-month taxable supplies should be, fill it before exchange — or price the registration.
Tanous writes for CFOs and deal teams who need the statute and the operating control, not the press release. This note is general commentary on a published Tribunal decision; it is not advice on any specific transaction.