BIM90045 | Post-cessation receipts and expenses: meaning of post-cessation receipts: receipts relating to post-cessation expenses

S250 Income Tax (Trading and Other Income) Act 2005,

If insurance proceeds or compensation is received in relation to post-cessation expenses these amounts are post-cessation receipts

This guidance relates to persons subject to Income Tax only. Therefore it applies to individuals, trustees, personal representatives and non-resident companies.

As discussed in BIM90090, there are a number of mechanisms by which a person can obtain relief for post-cessation expenses (which are defined in BIM90080). The most valuable relief is post-cessation trade relief, by which qualifying expenses can be deducted from total income (see BIM90100).

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).

However, if receipts are later received which relate to a ‘qualifying payment’ which has previously been relieved against total income, these receipts are post-cessation receipts in the hands of the person who receives them.

This is to ensure that post-cessation expenses are only relieved to the extent that they are ultimately borne by the person.

Examples

Such post-cessation receipts might include:

• insurance proceeds or compensation received in relation to defective work, goods or services

• refund of any premium paid to insure against defective work, goods or services

• any sum received towards the cost of collecting a debt