This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Business Income Manual

Post-cessation receipts and expenses: receipts which are not post-cessation receipts: transfer of work in progress

S252 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005)

Payment for the transfer of work in progress is not usually a post-cessation receipt unless valued at cost

This guidance applies to unincorporated businesses only.

When an unincorporated business ceases to trade, it may still have work currently in progress which could be transferred.

If the work in progress is valued in accordance with the tax legislation and included in the profit and loss account in the final period of account, any amount received for the transfer of the work in progress is not a post-cessation receipt. This is because the value of the work has already been included in calculating the taxable profits of the trade to cessation.

The rules on valuation of work in progress on cessation are found in Chap 12 Part 2 ITTOIA 2005. For guidance on the application of these provisions, see BIM33540.

For these purposes, work in progress takes the definition in S183 ITTOIA 2005 (see BIM33020).

Barristers and advocates who are permitted to use the alternative basis in the seven years following their first holding themselves out for work are not required to value their work in progress and so will not meet the conditions discussed above. This means that any payments that such barristers and advocates receive for the transfer of work in progress are taxable as post-cessation receipts.

For more information on the alternative basis which can be used by barristers and advocates, see BIM51110. The alternative basis is no longer available to newly qualified barristers and advocates and can only be used by those who were calculating their profits on that basis in the tax year 2012/13.

Exception to the rule

However, any amount or value received as consideration for the transfer of work in progress will be a post-cessation receipt where:

  • the work in progress is transferred on the cessation of trade,
  • the transferor makes an election for the work in progress to be transferred at cost under S185 ITTOIA 2005.

Again, this is discussed in BIM33540.

Other receipts which are not post-cessation receipts

Other receipts which are specifically excluded from being post-cessation receipts are:

  • payments for transfer of trading stock (see BIM90055),
  • lump sums paid to personal representatives for copyright etc (see BIM90065).