“(1) The general rule is that this Part applies only to intangible fixed assets of a company (“the company”) that— (a) are created by the company on or after1 April 2002 , (b) are acquired by the company on or after that date from a person who at the time of the acquisition is not a related party in relation to the company, or (c) are acquired by the company on or after that date in case A, B or C from a person who at the time of the acquisition is a related party in relation to the company. (2) For provisions explaining when assets are treated as created or acquired, see sections 883 to 889. … (5) Case C is where the asset was created on or after1 April 2002 by the person from whom it is acquired or any other person.”
“For the purposes of section 882 (application of this Part to assets created or acquired on or after1 April 2002 ) goodwill is treated as created — (a) before (and not on or after)1 April 2002 in a case in which the business in question was carried on at any time before that date by the company or a related party, and (b) on or after1 April 2002 in any other case.”
“It seems to me that these activities, even when glorified by the title of sugar merchants, have no single significant feature in common with its previous trade of manufacturing confectioners, except that both are in one or another way concerned with sugar and cellophane paper.”
“This approach ignores the fact that, as Lord Donovan put it, there is an organic unity about a trade, which invalidates this sort of dissection. It comes very close to an assertion that because Kawthar has been involved in IT-related activities throughout its existence, therefore it has been carrying on a single trade of IT consultancy. However, it is clearly not the case that everything a company, or any person, does by way of trading activities connected to a subject-matter which comes under the same general description (such as IT) must therefore be regarded as a single trade.”
“It was contended that it was immaterial to the appellants' trading whether they manufactured their particular brand of beer by the hands of their own workmen or arranged with some other party to manufacture it for them and to their order. In either event their trade was the distribution and sale for profit of their own particular brand of beer. Upon such an approach to the matter the trade both before and after1st October 1953 , so it was contended, was the same. But, in my view, this contention involves a misdescription of the real nature of the appellants' trade. The essence of that trade, as I see it, before1st October 1953 was the manufacture for sale by the appellants of their own particular brand of beer. Their selling and distribution organisation was merely ancillary to that main trading activity. It is, in my view, quite false to suggest that their trade throughout was essentially the distribution of a special brand of beer whoever may have been the manufacturer.”
“Quite apart from all cases, however, it appears to me that there is all the difference in the world between an organic growth of a trade and a sudden and dramatic change brought about by either the acquisition or the loss of activities on a considerable scale.”
“Thus the involvement of Netlogic itself was a major change in the way Kawthar carried on its trading activities, and this, coupled with the change in emphasis of Kawthar's activities towards the provision of consultancy services strongly suggests that from 1998 onwards Kawthar has been carrying on a different trade from that carried on by it before 1996.”
“I doubt if one can as a rule segregate the various activities involved in carrying on a trade, select one of them as being of the essence, and then designate the one selected as being the real trade. There is, I think, an organic unity about a trade which invalidates this sort of dissection; and I think that Rowlatt J. was saying much the same thing, though more incisively, when he remarked in Graham v. Green that a trade differs from the individual acts which go to make it up, just as a bundle differs from odd sticks. If the Respondent Company had been asked in period (1) what its trade was, it would have replied, ‘Making and selling surgical products’–not merely, ‘Selling surgical products’. And in period (2), if asked the same question, I think the Company would have replied, and properly replied, ‘We have changed over now simply to selling’. For what it is worth, moreover, the definition of ‘trade’ for the purposes of the Income Tax Acts includes ‘every manufacture’. This may not be worth much– indeed, the whole definition is not worth very much–unless it is to be implied that the definition assumes in this respect that the goods manufactured will be sold. But the definition does, I think, show that manufacture is to be regarded as more than a means to an end.”
“all the difference in the world between an organic growth of a trade and a sudden and dramatic change brought about by either the acquisition or the loss of activities on a considerable scale”
“Let me illustrate what I mean by the case of a company owning a single village grocers shop. Over the years it acquires, a few at a time, additional shops; it then organises a central system of bulk buying for them; it may then possibly organise manufacturing facilities in respect of various lines for its chain of shops to sell; and it may well move into the realms of transport and run its own fleet of vans. If it can do all this without ever having discontinued one trade and commenced another – which is the assumption which has to be made in the present case and which may well be correct – well and good. The final trade of that company will, however, as a matter of business activity, bear but little relationship to its original beginnings.”
“Then if, as a result of some crisis, that company has to get rid of all of its activities by selling them off, leaving it with only the original village shop, I would myself be under no doubt whatsoever but that there had been a violent change in the trade of that company.”
“The facts we have found are that in the period before 1996, Kawthar dealt in computers and computer software. Kawthar provided connected services as well, particularly when it was fulfilling “turnkey” projects, such as the Big Project, but the core of its activities was dealing in computers and computer software. There were changes over time in the nature of these activities, for example, the computers themselves changed, computer software, rather than computers, assumed more importance, and in 1992 Kawthar stopped selling computer hardware items. We regard these changes as organic developments of Kawthar’s trade.”
“Now that, of course, does not mean that the business, regarded after the succession, must be in every respect and in every detail identical with the business which was carried on before the succession. The successor may succeed to a business, let me say, with fifty shops; he may choose to shut up some of those shops; he may make alterations in the goods that he sells; all sorts of alterations of that kind may take place; he may change his supplier; he may cut out a particular class of customer or a particular area. All questions of that kind appear to me to be really matters of fact for the determination of the Commissioners,…Changes of that kind may or may not be so substantial as to make it right to say, as a matter of fact that would be a question for the Commissioners), that the business is not the same as the one to which he succeeded. The differences may be so substantial as to justify a finding to that effect.”
“Doubtless the trade of the company would remain the same trade even although, as a result of organic growth in response to every factor which might influence it, the company adopted new compatible operations and discarded portions of its old.”