Champer 3 - Intervals in trading

Question 1

How to decide if the earlier trade has ceased during a break in activity

Answer 1

Step 1 – consider the nature of the trade. The activities carried on before the break may be so different from those carried on after the break that they cannot possibly be the same trade. This is a question of fact based on the activities undertaken.

Step 2 – if the activities carried on after the break are
similar in nature and scale to the activities carried on before the break, you will need to look at all the circumstances surrounding the break itself. In particular, you will need to consider
-the length of the break
and
-the intentions of the trader as evidenced by their actions, at the time the earlier activities ceased.

Question 2

Considerations as to whether the trade ceased or whether they had a temporary break. (3)

Answer 2

1. The activities carried on before the break.
2. The length of the break.
3. The intentions of the trader as evidenced by their actions, at the time the earlier activities ceased.

Question 3

Kirk and Randall Ltd v Dunn

Answer 3

Construction company won no new contracts and sold up premises in 1914, but they maintained an office, held meetings and tendered for work. It was bought in 1920 and flourished under new owners, it had not ceased to trade as it maintained trading activity in the dormant period by bidding for work.

Question 4

Goff v Osbourne & Co (Sheffield)

Answer 4

Cutlery makers sold premises, paid up debts and informed that it ceased trading. It started up again and crown argued it was a new business and not a continuation, the crown won as it was not the same business that emerged after the trade ceased.

Question 5

J G Ingram Ltd v Callaghan

Answer 5

Made and sold surgical goods, it stopped and then just sold surgical goods, it was sold and then restarted selling and manufacturing. Was found to be no continuation between the trades as the facts indicated that each trade ceased with no chance of restarting.

Question 6

Seldon v Croom-Johnson

Answer 6

Argued his barrister profession ceased when he became a Kings Counsel, citing that he moved chambers from Bristol to London. Found he hadn’t ceased trading as his barrister profession is not tied to a location and customer base is nationwide.

Question 7

Sargent v Barnes

Answer 7

Claim for travel expenses found that a dentists profession was at his practice and not a lab near his house where a technician made his dentures. This prevented him claiming travel expenses between two places of business.

Question 8

Changes in residency status - conditions to cease trade

Answer 8

S17 ITTOIA applies to an individual

• who is not in a partnership, and
• who is carrying on a trade, profession or vocation wholly or partly outside the UK, and
• who becomes or ceases to be UK resident but continues with the same business.

Question 9

Effect if there is a change in residence status

Answer 9

the individual is deemed to have permanently discontinued the trade and commenced a new one. For tax purposes the change in resident status is treated as a permanent discontinuance of the business, immediately followed by the setting up and commencement of a new one. However, any losses incurred before the change can still be carried forward
and set against the profits of that business