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HMRC internal manual

Business Income Manual

Post-cessation receipts and expenses: relief for post-cessation expenses against post-cessation receipts

S254-S255 Income Tax (Trading and Other Income) Act 2005. S196-S197 Corporation Tax Act 2009

Post-cessation expenses must first be set against post-cessation receipts arising in the period before considering whether any other reliefs are available

As discussed in BIM90090, there are a number of ways by which post-cessation expenses can be relieved. However, post-cessation expenses must first be set against post-cessation receipts arising in the same period from the same trade before considering any other method of relief.

If the post-cessation expenditure is incurred across more that one period, the deduction should be made from post-cessation receipts received in the earlier period in priority to a later period. However, the deduction cannot be given in a period before the expense has been incurred.

Exceptions to the rule (those subject to Income Tax only)

Individuals, trustees, personal representatives and non-resident companies subject to Income Tax who incur post-cessation expenditure cannot deduct these expenses from the following post-cessation receipts:

  • bad or doubtful debts paid after cessation (see BIM90035)
  • receipts relating to post-cessation expenditure (see BIM90045)

Post-cessation receipts carried back

If the post-cessation receipts arise within six years of cessation, the person receiving the income can elect to carry back the receipts to the date of cessation (see BIM90075). Where this election has been made, for the purposes of the legislation it is as if these amounts were received at the date of cessation.

No post-cessation receipts to set the expenses against

If there are no post-cessation receipts arising in the period, the person needs to consider whether relief is available under the other mechanisms listed in BIM90090.

This is also the case where the post-cessation expenses incurred in the period exceed the post-cessation receipts arising in the period.