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HMRC internal manual

Business Income Manual

Post-cessation receipts and expenses: post-cessation trade relief

S96, S98A, S99 Income Tax Act 2007

Post-cessation trade relief is available if the expenses are incurred within seven years of cessation and fall into specific categories

This guidance relates to post-cessation expenses incurred by individuals, trustees, personal representatives and non-resident companies subject to Income Tax only.

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 (see BIM90095).

If there are no post-cessation receipts in the period, or the post-cessation expenses exceed the receipts, relief against total income of the person who incurred the expense is potentially available.


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).

In addition, the ‘qualifying payment’ must have been made, or the qualifying event have occurred, within seven years of the cessation of the trade.

The person who carried on the ceased business must be the same as the person who makes the qualifying payment or the person to whom the qualifying event happens, The personal representatives may, however, make a claim for relief during the period of administration, where the deceased carried on the trade.

There is also a targeted anti-avoidance rule which applies from 12 January 2012 which prevents post-cessation trade relief being given where a qualifying payment or qualifying event arises from arrangements entered into in which the main purpose, or one of the main purposes, is to obtain a tax reduction (see BIM90120).

Reduction for unpaid expenses

When applying post-cessation trade relief, the amount eligible for relief must be reduced by the amount of the expenses that are still unpaid at the end of the tax year in question. The reduction should not include any amount taken into account as a reduction in a previous tax year. This prevents a double restriction for the same expenditure.

See BIM90105 for a full explanation and an example.

Any of the trade expenses paid subsequently are to be treated as a ‘qualifying payment’ (see BIM90110).

Method of relief

If the post-cessation expense is a ‘qualifying payment’, relief is given by deducting the amount paid from the person’s total income in the tax year in which the income is paid. The amount is deducted at Step 2 in the Income Tax calculation under Section 23.

If the post-cessation expense is deemed to arise as a result of a ‘qualifying event’, relief is given by deducting the appropriate amount of the debt (see BIM90115) against the person’s total income in the tax year of the event. Again, the deduction is made at Step 2 of the Section 23 calculation.

For the priority of reliefs where the individual is also able to make a claim for relief under Step 2 for liabilities of a former employment, see BIM90125.

Time limit for claim

The claim must be made by the first anniversary of the normal self-assessment filing date for the tax year for which the deduction is to be made (see above). The self-assessment filing date depends on the date the return was issued. For most taxpayers, the filing deadline will be 31 January following the end of the tax year.

This means that, for example, if the deduction were to be made against total income in the 2012/13 tax year, the claim must be made by 31 January 2015.

Post-cessation expenses exceed total income

If the post-cessation expenses exceed total income, or there is no income in the tax year, the unrelieved post-cessation expenses can either be:

  • set against chargeable gains arising in the tax year (see BIM90130)
  • carried forward to be relieved against future post-cessation receipts from the same trade (see BIM90135)

Post-cessation expenses which do not fall into the categories for Income Tax relief

If the person incurs post-cessation expenses which do not fall into the categories of ‘qualifying payments’ or ‘qualifying events’, the only method of relief (after deducting them from post-cessation receipts, see BIM90095) is to carry them forward to set against future post-cessation profits of the same trade (see BIM90135).