BIM70645 - Business changes: succession and changes in ownership: general principles

Not every change by which one trader replaces another amounts to a succession. It must be true and fair to say that the business in respect of which the successor is making profits is the business to which he or she succeeded. The business, regarded after the succession, need not, however, be identical in every respect and in every detail with the business which was carried on before the succession (Laycock v Freeman Hardy and Willis Ltd [1938] 22TC288, pages 297 - 298).

It is a question of fact for the Commissioners whether changes made to the business are so substantial as to make it right to say that the business as carried on by the successor is not the same as the one to which he or she succeeded (see Maidment v Kibby [1993] 66TC137, for a case where the court refused to interfere with a Commissioners’ decision on this issue - the facts were ‘just about sufficient’ to support their conclusion).

If there is a succession it is immaterial to what extent the successor merges the activities with an existing business. The commencement provisions must still be applied to the profits properly attributable to the trade to which he or she has succeeded (Briton Ferry Steel Co Ltd v Barry [1939] 23TC414, at page 429).