BIM90030 | Post-cessation receipts and expenses: meaning of post-cessation receipts
From HM Revenue & Customs · Business Income Manual
S-S Income Tax (Trading and Other Income) Act 2005 (), S-S Corporation Tax Act 2009 ()
Post-cessation receipts are usually something that would have been taken into account in arriving at the profits of the trade had it not ceased
The legislation provides for the taxation of certain receipts arising from the carrying on of a trade which:
are received after a person permanently ceases to carry on a trade
arise from the carrying on of the trade before the cessation, and
are not otherwise subject to tax (see ).
Other receipts which are treated as post-cessation receipts
As well as income which meets the conditions above, the following types of income are specifically treated as post-cessation receipts by the legislation. This is the case if they are received after the recipient’s trade has ceased:
disqualifying benefits received in relation to contributions to local enterprise organisations or urban regeneration companies (under or )
distribution of assets of mutual concerns (under or , see )
receipt of benefits by a donor or connected person in relation to a gift to charity (under or )
where at the cessation of a profession or vocation an election is made to value work in progress at cost, the difference between that cost and any sums received for the transfer of that work in progress (under , see and ) *
debts paid after cessation (see )
debts released after cessation (see )
receipts relating to post-cessation expenses (see ) *
transfer of rights if transferee does not carry on a trade (see )
foreign income in relation to the trade which had been unremittable but becomes remittable after the trade has ceased (under or )
* does not apply to companies subject to Corporation Tax.
Receipts received after cessation which are not post-cessation receipts
Certain receipts are specifically excluded by law from being a post-cessation receipt (see ).
Post-cessation receipts of former partners
If a partner leaves a partnership, he ceases to trade even though the trade of the partnership may continue. Therefore any sum received which falls within the above rules is a post-cessation receipt.
Cash basis
If, immediately before a person permanently ceases to carry on a trade, a cash basis election has effect in relation to the trade, a sum is to be treated as a post-cessation receipt only if it would have been brought into account in calculating the profits of the trade on the cash basis had it been received at that time (see onwards).