Post-cessation receipts and expenses: meaning of post-cessation receipts: receipts relating to post-cessation expenses
S250 Income Tax (Trading and Other Income) Act 2005,
If insurance proceeds or compensation is received in relation to post-cessation expenses these amounts are post-cessation receipts
This guidance relates to persons subject to Income Tax only. Therefore it applies to individuals, trustees, personal representatives and non-resident companies.
As discussed in BIM90090, there are a number of mechanisms by which a person can obtain relief for post-cessation expenses (which are defined in BIM90080). The most valuable relief is post-cessation trade relief, by which qualifying expenses can be deducted from total income (see BIM90100).
Post-cessation trade relief is available for post-cessation expenses if:
- the person makes a ‘qualifying payment’ (see BIM90110), or
- a ‘qualifying event’ occurs in relation to a debt owed to the person (see BIM90115).
However, if receipts are later received which relate to a ‘qualifying payment’ which has previously been relieved against total income, these receipts are post-cessation receipts in the hands of the person who receives them.
This is to ensure that post-cessation expenses are only relieved to the extent that they are ultimately borne by the person.
Such post-cessation receipts might include:
- insurance proceeds or compensation received in relation to defective work, goods or services
- refund of any premium paid to insure against defective work, goods or services
- any sum received towards the cost of collecting a debt