Commentary

B1.608 Determining a succession: case law

Business tax
Business tax | Commentary

B1.608 Determining a succession: case law

Business tax | Commentary

B1.608 Determining a succession: case law

As mentioned at B1.606, several tests have emerged from decided cases that can be broadly applied to determine whether a succession has taken place. Some of these are discussed further below and include:

  1.  

    •     whether a similar trade has been carried on after the transfer

  2.  

    •     whether the whole business has been transferred

  3.  

    •     whether goodwill or other intangible assets are included in the transfer

  4.  

    •     whether staff are taken over

  5.  

    •     the treatment on transfer of the stock and debts of the transferor, and

  6.  

    •     whether there was an interval in the carrying on of the trade as a result of the transfer

Whether similar trade carried on after transfer

The first factor to be considered is the extent to which the possible successor carried on a similar trade after the transfer, because the business after succession need not be identical in every respect to the business carried on before the succession1. Thus in James Shipstone & Sons Ltd2 the taxpayer company acquired the shares of another company and then leased from it the latter company's brewing and tied houses. The taxpayer company supplied its own beer to the tied houses and brewing stopped at the leasing brewery. It was held that a succession had taken place, one important reason being that the company brewed and retailed beer both before and after the transfer.

This case has also been cited as an illustration of two propositions:

  1.  

    •     that the sale of major trade assets will

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