Cessation of Trade

    November 2013

    It is often quite important to determine when a trade ceases - one of those reasons being the application of terminal loss relief. This issue was examined recently by the First-tier Tribunal in the case of Dhalomal ICishore v HMRC TC2855 although the conclusions were somewhat curious.

    The taxpayer was trading in mobile phones and claimed to have ceased totrade in June 2006. The facts were a bit complicated, but never mind.

    What caught my eye was the concluding part of the judgement of the tribunal and its reasoning for concluding that he had not ceased to trade, which went as follows:

    "(a) We find that Mr Kishore remained able to trade in mobile phones after June 2006.

    (b) We consider that the reason that he did not do so was because [various reasons].

    (c) We find that Mr Kishore did not rule out the possibility of trading in mobile phones again if the circumstances were right and the opportunity arose.

    (d) Mr Kishore stopped trading in mobile phones after April 2006."

    The tribunal concluded that Mr Kishore did not cease trading in 2006/07.

    No - I cannot understand it either. I could understand an argument that the trade did not cease but was merely suspended (like in those wartime cases where hostilities rather got in the way) but there was no suggestion that this principle was being adopted here.

    Similarly, we know from the decision in A Debtor v CIR and Official Receiver [1992] STC 549 that a business continues until all the debts of the business incurred in the course of trade have been paid, and that includes liabilities for taxation. However, there is no suggestion that this was in point either.

    It seems rather odd (quaint perhaps) that despite the importance of trading in our tax code, it provides no definition of a trade, nor is it particularly clear when a trade starts (see Mansell v HMRC SpC 551) or when one ceases.

    This article was first published in TAXline - November 2013