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HMRC internal manual

Business Income Manual

Computing the amount to assess: business changes: changes in scale, nature or location of trade: general principles

Trades are rarely static and can change their nature over the years so as to be unrecognisable from their origins.  Changes can arise as a result of:

  • Re-location (BIM80605)
  • Acquiring a new business (BIM80615)
  • Merging with another business (BIM80680)
  • Breaking up the activities of a business by demerger (BIM80685)

Such changes may amount to the cessation of an existing trade or trades, and the commencement of new ones.  This will be an issue in the context of, for example

  • the cessation and commencement provisions (BIM81000 onwards), or
  • the rules for claiming losses carried forward (BIM85060).

The question is also relevant in the context of S673 Corporation Tax Act 2010, which disallows trading losses carried forward by a company following a change in ownership and ‘a major change in the nature or conduct of a trade.’ (CTM06370).

In each case it is question of fact whether the change amounts to the continuation of an existing trade, or the cessation of one or more trades and the commencement of new ones.  The judgments of Lord Carmont and Lord Guthrie in Gordon & Blair, Ltd v CIR [1962] 40TC358 also stress that questions of cessation caused by a change in activities are a matter of degree.

The way to approach this question is considered in BIM80595