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HMRC internal manual

Business Income Manual

Computing the amount to assess: business changes: cessation: death and insolvency

Normally a trade ceases when the sole proprietor dies (or the company carrying it on is put into liquidation). This is because the personal representatives (or liquidator) are restricted to winding up the affairs of the deceased (or of the company) to the best advantage of the beneficiaries of the estate (or the company’s creditors and shareholders). This does not normally include the carrying on of the business (Cohan’s Executors v CIR [1924] 12TC602). However there may occasionally be evidence that the personal representatives (or liquidator) were in fact continuing to trade (Wood v Public Trustee as Executor of Sir Alec Black, deceased [1952] 33TC173; Pattullo’s Trustees v CIR [1955] 36TC87). The appointment of a receiver or an administrator of a company does not of itself bring about a cessation of trade since there is no legal restriction on trading by a receiver or an administrator.

If, on the death of a husband, wife or civil partner, a business passes from the deceased to the surviving spouse, the cessation and commencement provisions will apply.