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HMRC internal manual

Business Income Manual

Computing the amount to assess: business changes: changes in scale, nature or location of trade: changes in residence status

S17 Income (Trading and Other Income) Act 2005

This section applies where an individual not in partnership:

  • is carrying on a trade wholly or partly outside the UK,
  • and becomes or ceases to be UK resident.

He is deemed to have permanently discontinued the trade and commenced a new one. Tax is charged as though the change in resident status:

  • constituted a permanent discontinuance of the business,
  • immediately followed (when the business is, in fact, continued by the individual) by the setting up and commencement of a new one.

Despite the cessation and recommencement treatment, any losses incurred before the change can be carried forward under S83 Income Tax Act 2007 and set against profits of the same business. See BIM85060.

Where the split year treatment applies to determine the individual’s residence status, the business is likewise treated as ceasing and recommencing on the actual date of arrival or departure.

This rule does not apply to individuals carrying on a trade in partnership, but there are instead special provisions on how non-resident partners are taxed on their share of partnership profits (ITH1664).