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HMRC internal manual

Business Income Manual

Post-cessation receipts and expenses: meaning of post-cessation receipts: transfer of rights if transferee does not carry on the trade

S251 Income Tax (Trading and Other Income) Act 2005, S194 Corporation Tax Act 2009

The sale or gift of rights to a future post-cessation receipt might itself be a post-cessation receipt

This guidance applies where a person ceases trading and transfers the right to receive a sum that would be a post-cessation receipt to someone who does not take over the trade.

Provided the assignment of the rights takes place after the trade has ceased, the value received in consideration is itself a post-cessation receipt in the hands of the transferor.

The amount of the consideration depends on the circumstances of the transfer. If:

  • the transfer is made at arm’s length, the post-cessation receipt is the amount or value of the consideration paid by the transferee, or
  • the transfer is not at arm’s length, the post-cessation receipt is the amount equivalent to the market value of the rights transferred.

The transferee is not taxable on the amounts received following the assignment of the rights under the post-cessation legislation. Instead, the transferee may be taxable under the trading or miscellaneous income legislation depending on the facts of the case.

If the transfer of the rights takes place prior to the cessation of the trade, the consideration would normally be a trading receipt in the hands of the transferor.

Exclusions to this rule

These rules do not apply to:

  • transfers of trading stock (see BIM90055)
  • transfers of work in progress (see BIM90060) *
  • lump sums paid to personal representatives for copyright etc (see BIM90065) *

  • does not apply to companies subject to Corporation Tax.

Transferee takes over the trade

For the situation where the person receiving the transfer is the person who takes over the trade, see BIM90070.