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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Businesses: mergers: previous businesses continue as a merged joint business

Where the activities of business A and business B are similar in nature the activities of ‘merged’, business C may have the same essential characteristics as both business A and business B.

Taken in isolation this merged business may properly be described as a single business (business C). Otherwise no merger has taken place and business A and business B are simply continuing side by side under common ownership. Considered in this context the new business can also be described as an enlarged version of either business A and business B. In such circumstances business C has ‘succeeded’ to business A and/or business B.

If the newly merged business has the same accounting date as the previous businesses, all the partners in the merged partnership will continue to be taxed on the trading profits arising on their notional trade and the other untaxed partnership income arising on their notional business under the general rule. The general rule is that the basis period for a tax year is the period of 12 months ending with the accounting date in that tax year (see BIM82265).

The newly merged business may have a different accounting date to one or more of the previous businesses. In such a case, the partners moving to a new accounting date upon merger will be treated as having changed their accounting date and the usual rules apply (see BIM82270).

For an example, see BIM82425.

For further reading in relation to the meaning of ‘notional trade’ and ‘notional business’, see BIM82410.

As the business is deemed to continue this means that the tax treatment of any trading losses brought forward is unaffected.

If it is contended that the merger of two or more businesses of different natures results in a merged business such that the existing businesses continue, the case should be submitted to CTISA (Technical).