Taking over a pub, café or restaurant

Buying the business or the company

A pub, café or restaurant can be bought in two ways. Buying the business means buying its assets: the fittings, equipment, stock, goodwill and often the lease or the building. The seller keeps its company or its self-employment, with its history. Buying the company means buying its shares. The company carries on with its VAT registration, payroll, contracts, licences in its own name and its tax history, including any tax it owes.

VAT Notice 700/9 confirms that a sale of shares is not a transfer of a going concern, because the business stays with the same company.

VAT on a transfer of a going concern

Where a business is sold as a going concern, the sale is not a supply for VAT and no VAT is charged. This is mandatory where the conditions are met: it is not a choice for the buyer or seller. VAT Notice 700/9 sets out the conditions, which include:

• the assets are sold as a business, as a going concern
• the buyer intends to use them to carry on the same kind of business as the seller
• there is no significant break in trading before or immediately after the transfer
• where the seller is VAT-registered, the buyer is VAT-registered or required to be at the date of the transfer
• where only part of a business is sold, that part can operate separately

Notice 700/9 gives examples. An Italian restaurant sold to a buyer who runs a hot snack café from the premises is the same kind of business. A short closure for redecoration does not stop the sale being a transfer of a going concern, and nor does a seasonal closure where the business normally shuts. A brewery that sells a pub it has been renting out to an operator, where the buyer will run the pub, is not transferring a going concern, because the brewery's business was owning the property.

If VAT is charged on a sale that should have been a transfer of a going concern, the buyer may not be able to reclaim it. If none is charged on a sale that does not qualify, the seller owes it. HMRC can add penalties and interest in either case.

VAT on the costs of buying the business, such as solicitors' and agents' fees, can still be reclaimed under the normal rules. Where the buyer will use the assets only to make taxable sales, as a pub, café or restaurant does, the VAT on those costs can be recovered in full (section 2.5.1).

Registration and records after the sale

A buyer who takes over a VAT-registered business must register if the turnover of the business taken over, together with its own, is above the £90,000 threshold. Registration has to be in place by the date of the transfer for the sale to qualify, so it is applied for in good time.

The buyer can apply on form VAT68 to keep the seller's VAT number. In that case the buyer takes on the seller's VAT liabilities and the seller's VAT records. Otherwise the seller keeps its records and deregisters on form VAT7 if it stops trading, telling HMRC within 30 days.

The building and the option to tax

Where the sale includes a building the seller has opted to tax, the building is part of the transfer of a going concern only if the buyer also opts to tax, notifies HMRC, and tells the seller that its option will not be disapplied. All of this must be done by the relevant date, which is the earliest time of supply for the building, including a deposit paid to the seller. A deposit held by an independent stakeholder does not count.

A £450,000 freehold café sold with an option to tax in place

Buyer opts to tax and notifies the seller in time

The building is part of the transfer of a going concern. VAT charged on the building:

£0

Buyer does not opt to tax in time

The building falls outside the transfer, and the seller charges VAT at 20%:

£90,000

Staff and TUPE

Under the Transfer of Undertakings (Protection of Employment) Regulations, known as TUPE, the staff working in the business transfer to the buyer with their jobs and their terms and conditions.

• The seller informs and consults the employee representatives of affected staff. Since 1 July 2024, businesses with fewer than 50 employees, or where fewer than 10 employees transfer, can consult staff directly where there are no representatives.
• The seller gives the buyer employee liability information at least 4 weeks before the transfer.
• A buyer running a new payroll from the transfer date needs its own PAYE scheme and, where customers tip, its own written tipping policy and tipping record.

Licences and food registration

In England and Wales, a premises licence under the Licensing Act 2003 is needed to sell alcohol. The buyer applies to the licensing authority to transfer it. With the current holder's consent, the transfer can take effect as soon as the application is made, under section 43. The police have 14 days from receiving a copy of the application to object (section 42).

A personal licence is not needed to work in a pub, but every sale of alcohol must be authorised by a personal licence holder. Applicants must be 18 or over and usually need an accredited qualification. A buyer new to the trade who will run the bar plans the course and application before completion.

The premises must have a designated premises supervisor who holds a personal licence. A buyer who wants their own manager in the role applies to vary the licence to name them.

A food business registers with the local council at least 28 days before it starts trading, for each site, in England, Wales and Northern Ireland.

Stamp duty land tax and the price split

In England and Northern Ireland, stamp duty land tax on non-residential property is 0% on the first £150,000, 2% on the next £100,000 and 5% above £250,000. The buyer files a return and pays within 14 days of completion.

Stamp duty land tax on £450,000 of non-residential property in England

• First £150,000 at 0%£0
• Next £100,000 at 2%£2,000
• Remaining £200,000 at 5%£10,000
• Stamp duty land tax£12,000

The sale contract splits the price between the property, goodwill, equipment and stock. The same split is used for capital allowances and for the buyer's opening accounts.

A £600,000 purchase of a freehold café business

Part of the price	Amount	Where it goes
Freehold property	£450,000	Stamp duty land tax
Fixtures in the building	Within the £450,000, at the value in the section 198 election	Capital allowances, if the seller pooled them
Kitchen equipment, furniture and tills	£40,000	Annual Investment Allowance
Goodwill	£100,000	The buyer's balance sheet
Stock	£10,000	Cost of sales when sold

Fixtures and capital allowances

A buyer can usually claim capital allowances only on fixtures the seller claimed for, and the two must agree their value. That is done by a joint election under section 198 of the Capital Allowances Act 2001, in writing within two years of the purchase. Loose equipment, furniture and tills bought with the business qualify for the Annual Investment Allowance, but not full expensing, because they are not new.

The seller's side

A seller who stops trading and does not pass the VAT number to the buyer deregisters on form VAT7 and keeps the business records. Where the VAT number passes to the buyer on form VAT68, the records go with it. A company that sells its business still files its company tax return within 12 months of the end of its accounting period and pays corporation tax 9 months and 1 day after it. A sole trader reports the sale on their Self Assessment return; the 2025/26 return is due by 31 January 2027.

Where the seller employed staff, the employee liability information goes to the buyer at least 4 weeks before the transfer, and the seller's final payroll submission is made on or before the last payday.

Common mistakes and what HMRC does

• Charging VAT on a sale that qualifies as a transfer of a going concern.
• The buyer not being VAT-registered by the date of the transfer.
• The buyer missing the option to tax on an opted building, so VAT is due on the building.
• Taking over the seller's VAT number without checking what VAT the seller owes.
• No section 198 election, so the claim on fixtures is lost.
• Trading before the premises licence is transferred or the food business is registered.
• Not budgeting for staff costs that transfer under TUPE.

HMRC assesses VAT wrongly charged or not charged on the sale, with interest, and penalties of up to 30% of the tax where reasonable care was not taken.

Records and deadlines

• The sale contract, with the split of the price between property, goodwill, equipment and stock.
• Evidence of the transfer of a going concern conditions, the buyer's VAT registration and any option to tax notifications.
• Any VAT68 or VAT7 forms, and the business records handed over.
• The section 198 election and any structures and buildings allowance statement.
• Stamp duty land tax return and payment within 14 days of completion.
• Food business registration at least 28 days before trading.
• Employee liability information at least 4 weeks before the transfer.

How we help

We check the transfer of a going concern conditions and the option to tax before contracts are signed, agree the price split and the section 198 election, and work out the stamp duty land tax. From the completion date we set up the buyer's VAT, payroll and tronc. More on buying or selling a hospitality business.