Businesses frequently expand by acquiring other existing
businesses. Where a trader acquires another business as a going
concern, depending on the facts, there are four possible
1. The new owner succeeds to the trade carried on the previous owner ( BIM70645)
For this to happen:
Factors which would be relevant to establishing succession are:
But no one factor will necessarily be conclusive.
If there has been a change in the persons carrying on the trade then the commencement provisions will apply to the profits from the new business. If the new owner draws up a single set of accounts for their old and new businesses, the profits will have to be apportioned to enable this to be done. Unless the new business is a separate trade from their old one (BIM70530) there will be no need for any apportionment once the normal continuing basis period rules apply.
2. The new owner begins a new trade in addition to their existing trade ( BIM70530)
Factors which would affect whether there were two trades after the acquisition are:
If the new business is a separate trade then the commencement
BIM71045) will apply. The businesses
will continue to be assessed separately unless, as a matter of
fact, they are merged to form a single trade. If that happens, the
question again will be whether the combined business is a new one
or not (
3. The new owner begins a single, completely new trade ( BIM70595)
In this situation the acquisition of activities is on such a scale, or brings about such a change to the nature of the old business, that it means that the old business comes to an end. The combination of the two businesses represents an entirely new trade in its own right.
The commencement provisions will apply to all of the profits from the new business and the cessation provisions (BIM71120) to the old business.
4. The new owner simply expands their existing business
If none of the three previous situations apply then the acquisition of the business has no effect on the new owner’s basis of assessment. The new owner is simply carrying on the same trade as before, but on a larger scale (Maidment v Kibby  66TC137, is an example of this).