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HMRC internal manual

Business Income Manual

Computing the amount to assess: business changes: cessation: general principles

The date on which a business ‘permanently ceases to carry on a trade’ (S202 Income (Trading and Other Income) Act 2005) is normally the date on which it ‘closes its doors’ in circumstances which turn out to be permanent.  This is so even if at that time the proprietors intended or hoped to continue trading, but that expectation was not fulfilled (Marriott v Lane [1996] 69TC157 - although this was a Capital Gains Tax case, it should also be applied for income tax purposes).

However, if activity is recommenced, and the question is whether the new business is a continuation of the old, evidence of the proprietor’s intention will be relevant (BIM80580).

A mere decision to wind down or dispose of the business does not of itself amount to a permanent discontinuance if trading activity in fact continues after the decision (J & R O’Kane & Co v CIR [1922] 12TC303).