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HMRC internal manual

Business Income Manual

Post-cessation receipts and expenses: meaning of post-cessation receipts

S246-S247 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), S190-S191 Corporation Tax Act 2009 (CTA 2009)

Post-cessation receipts are usually something that would have been taken into account in arriving at the profits of the trade had it not ceased

The legislation provides for the taxation of certain receipts arising from the carrying on of a trade which:

  • are received after a person permanently ceases to carry on a trade
  • arise from the carrying on of the trade before the cessation, and
  • are not otherwise subject to tax (see BIM90010).

Other receipts which are treated as post-cessation receipts

As well as income which meets the conditions above, the following types of income are specifically treated as post-cessation receipts by the legislation. This is the case if they are received after the recipient’s trade has ceased:

  • disqualifying benefits received in relation to contributions to local enterprise organisations or urban regeneration companies (under S82(6) ITTOIA 2005 or S82(6) CTA 2009)
  • distribution of assets of mutual concerns (under S104(3) ITTOIA 2005 or S101(3) CTA 2009, see BIM24615)
  • receipt of benefits by a donor or connected person in relation to a gift to charity (under S109(2) ITTOIA 2005 or S108(3) CTA 2009)
  • where at the cessation of a profession or vocation an election is made to value work in progress at cost, the difference between that cost and any sums received for the transfer of that work in progress (under S185(1) ITTOIA 2005, see BIM90060 and BIM80690) *
  • debts paid after cessation (see BIM90035)
  • debts released after cessation (see BIM90040)
  • receipts relating to post-cessation expenses (see BIM90045) *
  • transfer of rights if transferee does not carry on a trade (see BIM90050)
  • foreign income in relation to the trade which had been unremittable but becomes remittable after the trade has ceased (under S844 ITTOIA 2005 or S1277 CTA 2009)

  • does not apply to companies subject to Corporation Tax.

Receipts received after cessation which are not post-cessation receipts

Certain receipts are specifically excluded by law from being a post-cessation receipt (see BIM90055).

Post-cessation receipts of former partners

If a partner leaves a partnership, he ceases to trade even though the trade of the partnership may continue. Therefore any sum received which falls within the above rules is a post-cessation receipt.

Cash basis

If, immediately before a person permanently ceases to carry on a trade, a cash basis election has effect in relation to the trade, a sum is to be treated as a post-cessation receipt only if it would have been brought into account in calculating the profits of the trade on the cash basis had it been received at that time (see BIM70015 onwards).