»Ê¹ÚÌåÓýapp

If a purchaser intends in due course to carry on a different kind of business using the assets purchased, the sale may still be a TOGC if he is to continue the old businesses initially. This test does not lend itself to a set time-span, because ‘continuation of a business� can vary between different types of activity.

This was the case in Dearwood (STC 327 /1987). This case was won by the Department on appeal to the High Court. Dearwood was a dealer in kitchens and bathrooms and acquired the assets of a company that made reproduction furniture.

Although the intention of Dearwood was to change the nature of the business acquired, what it had acquired was still a business capable of being continued. Furthermore, as a matter of fact, the assets purchased were used to carry on the same business, as Dearwood sold the reproduction furniture it purchased.

Similarly, Brian Oliver Jones (MAN/90/136) purchased a nightclub with a view to turning it into a restaurant. However, he ran it for one week as a night club. For this reason the tribunal found there to have been a TOGC for VAT purposes.

This can be contrasted with the following case.

»Ê¹ÚÌåÓýapp Padglade case, at tribunal (MAN/93/210) and in the High Court (STC 602/1995) provides useful guidance on the importance of motive. Padglade claimed as input tax, tax incurred on the purchase of various items and goods from Intermill Ltd. Intermill and Padglade had a common director. Despite this it has held that there was no TOGC as tribunal found that “the necessary rapport between vendor and purchaser was missingâ€�. »Ê¹ÚÌåÓýapp director asserted that the purpose of Padglade buying the goods was to assist Intermill to raise funds to cope with its financial difficulties - not to take over any part of its business. »Ê¹ÚÌåÓýapp HMCE argument that the tribunal was not entitled in law to take motive into account was rejected by the High Court in upholding the tribunal’s decision. »Ê¹ÚÌåÓýapp judge commented:

“»Ê¹ÚÌåÓýapp tribunal was entitled in principle to take into account the state of mind of both the transferor and the transferee at the time of the transfer. »Ê¹ÚÌåÓýapp fact that in truth, the transferor and the transferee, were controlled by the same man, is not legally relevant.â€�

It is not possible to set out hard and fast minimum periods that automatically define how long a business must be maintained by a purchaser for it to be regarded as a ‘continuing business� as to do so could lead to contrived TOGCs. Instead, a ‘continuing business� should always depend upon the nature of the business carried on and the intention of the purchaser.