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HMRC internal manual

Business Income Manual

Post-cessation receipts and expenses: post-cessation trade relief: targeted anti-avoidance provision

S98A ITA 2007

Anti-avoidance provision to counter schemes using post-cessation trade relief

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

The provisions in the legislation which allow certain post-cessation expenses to be relieved against total income and/or capital gains are very generous (see BIM90100 and BIM90130).

In response to a contrived and aggressive avoidance scheme that sought to generate post-cessation expenses that would then be relieved against total income or capital gains, a targeted anti-avoidance rule was introduced with effect from 12 January 2012 to block such schemes.

The targeted anti-avoidance rule prevents post-cessation trade relief being given where a ‘qualifying payment’ (see BIM90110) or ‘qualifying event’ (see BIM90115) arises directly or indirectly from ‘relevant tax avoidance arrangements’ entered into in which the main purpose, or one of the main purposes, is to obtain a tax reduction.

‘Relevant tax avoidance arrangements’ are widely defined in S98A ITA 2007.