Two businesses under separate ownership may be merged to form a single business under one ownership. Common examples are:
Where this happens, depending on the facts, there are 3
possibilities.
1. The new business is a completely new trade, different
from the two components (
BIM70595)
The two businesses could be so different in nature from each
other that what results from their combination is a new business
different from both of them (George Humphries & Co v Cook
[1934] 19TC121). So both businesses are permanently discontinued
and a new trade commences. This is likely to be rare.
2. One business is absorbed into the other
The owner of one business may merely acquire the assets of
another business and absorb them into their existing business
activities. So one business continues as the same trade and the
other is permanently discontinued.
3. The new business is a genuine merger
The two could be businesses carrying on the same sort of
activities. If so the business that results has succeeded to both
its component parts. Whether or not the commencement or cessation
provisions will apply depends upon the ownership of the two old
businesses and the new merged business (see SP9/86 (
BIM72260)).
