There was some movement of various operations and products between divisions, but evidence was heard that the divisions were autonomous and that the actions of the various divisions sometimes conflicted with each other. There were some arms-length interdivisional transactions and since 2000 there had been a greater emphasis on shared services. Each division had its own supply chain and separate manufacturing locations. Movement of employees between divisions, with the exception of top management and accounting staff, was infrequent. The customers of each division were generally different.

The financial results of the company were consolidated into a single set of accounts, which described the principal activities as ‘to provide integrated communications and embedded electronic solutions’. Turnover was analysed under only three classes.

Following the decision to close the large factory that made mobile phone handsets, only 200 jobs were retained (in the sales and marketing function and regional headquarters). The remaining 3,000 employees lost their jobs. Approximately 65% of sales came from manufacturing in 2000 (the remainder constituted the distribution of imported handsets). In 2002, all sales were of imported handsets. The company claimed a terminal loss of £208m for 2001.

A second factory manufactured electronic car engine management devices for a motor group and ‘telematics products for the automotive industry’. After the loss of a significant portion of business and unsuccessful attempts to manufacture other electronic products, the manufacturing business was relocated to Europe. At the time of closure, it was indicated that the design and development centre would be retained at the same site, but this was also relocated in 2002.

The first issue was whether the company carried on six trades (as the company contended) or only one (as HM Inspector of Taxes contended).

The Special Commissioners felt that the question in part turned on the level of ‘generality of the description of the trade’. The terms 'electronics' or 'communications' could cover practically all of the company’s activities. Adopting a layperson’s approach, the Special Commissioners felt that the products produced by the company were very similar. They formed the general impression that electronic products are becoming even more so and that features formerly found in one product, such as a computer or digital camera, are now found in mobile handsets. They were reluctant to divide electronic products into specific categories and felt that they could all be covered by a general 'electronic' heading.

The Special Commissioners noted that ‘each division had separate supply chains, operational management, products, manufacturing premises, budgeting, sales and marketing teams, notepaper, invoicing and accounting’. Nevertheless, they felt that this was dictated by the different customer bases of each division. Operational management was not considered a decisive factor, particularly since all divisions were ultimately managed by the chief executive and his team. It was also noted that each division used the same brand name and there was central ownership of all industrial property.

It was decided that the company carried on a single trade.

While not strictly required to do so, the Special Commissioners then opined that even if the company was regarded as carrying on six separate trades, the cessation of manufacturing operations did not necessarily constitute the cessation of a trade. The cases cited to the Special Commissioners involved situations where manufacturing activities constituted the whole of the taxpayers’ sales. Electronics Limited’s sales at the first site derived from both manufacturing and distributing handsets. Both operations were part of the trade and both did not cease when the company ceased manufacturing. There was insufficient evidence as regards the second factory closure, but the Special Commissioners did not consider that the cessation of manufacturing at that site was ‘so substantial to amount to a cessation of the combined trade of manufacturing and of the design centre’.

The question of whether or not a company is carrying on a single trade is one of fact. Nevertheless, the UK Special Commissioners' decision is likely to be of interest in Ireland given the legislative similarities between Ireland and the UK. If this decision is followed in Ireland, it should make it easier for companies to argue the existence of a single trade where the only differentiating factor is the product. Unlike Electronics Limited, there may be companies that would prefer to be regarded as operating a single trade. Of perhaps even more interest is the Special Commissioners' observation that there is no principle contained in the case law they reviewed that prescribes that whenever there is a cessation of manufacturing there is a cessation of trade. Taxpayers carrying on activities additional to manufacturing should take note.