313 Effect, in certain cases, of succession to trade, etc

Summary

Where a person succeeds to a trade or profession and the original trade or profession is treated as discontinued, any property belonging to the discontinued trade which is taken over by the successor without being sold is regarded as having being sold to the successor at its market value.

Details

Succession to a trade or profession

(1) This provision applies where —

• a person succeeds to a trade or profession which until that time had been carried on by another person,
• the trade or profession is treated as discontinued by virtue of section 69 [That section treats a trade or profession as being discontinued where the person (the predecessor) carrying on the trade or profession immediately before the succession is an individual and where the successor to the trade or profession is another individual or a partnership (which may include the predecessor).], and
• any property which immediately before the succession was in use for the discontinued trade or profession is taken over by the successor without being sold and is immediately put to use in the new trade or profession.

In any such case, the property is treated for the purposes of Part 9 (capital allowances for industrial buildings or structures, machinery or plant and dredging) as having been sold to the successor at the time of the succession for the price it would have fetched in an open market sale. The normal consequences of a sale follow, that is, a balancing allowance or balancing charge to or on the predecessor and writing-off allowances to the successor.

Trade or profession carried on in partnership

(2) This provision applies in the case of a continuing partnership trade or profession. By virtue of section 1009, where a trade or profession is being carried on in partnership, the trade or profession is treated as continuing so long as there are at least 2 partners in the partnership and on each change in the composition of the partnership there is at least one common partner before and after the change. In any such circumstances, the introduction of a new partner or the retirement of an existing partner does not result in the discontinuance of the partnership trade or profession.

(3) In the case of a continuing partnership trade or profession, allowances and charges under Part 9 (capital allowances for industrial buildings or structures, machinery or plant and dredging) are to be made to or on the persons carrying on the partnership on the assumption that the trade or profession had at all times been carried on by one and the same person, that is, changes in the composition of the partnership are ignored. The amount of any allowance or charge to be made at any time to or on the persons then carrying on the partnership trade or profession is to be computed as if those persons had at all times been carrying on that trade or profession and as if everything done by their predecessors in that trade or profession had been done by them. [This provision is made subject to section 1010 which contains rules for the apportionment of allowances and charges among persons in a partnership.]

Succession to trade or profession under will or intestacy – machinery or plant

This section does not impact on the right of a person who succeeds to a trade or profession under a will or intestacy to elect under section 295 to have the machinery or plant owned by the deceased and used in that trade or profession treated as if the person had bought it for the lower of its written down value for tax purposes or its market value.

Relevant Date: Finance Act 2021