Post-cessation receipts and expenses of a trade

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Post-cessation receipts and expenses of a trade
  • Post-cessation receipts
  • Post-cessation expenses
  • Cap on unlimited income tax reliefs

Accounts are normally prepared on the accruals basis, so any post-cessation receipts and expenses are normally accounted for in the final period of trading. Such profits have been earned in that final period and the expenses incurred in that period and therefore they should have been recorded in that final period.

Occasionally, however, income may be omitted or may arise after the final period of trading. Similarly, expenses could be incurred in relation to the trade at a later date.

Where the trader has elected to calculate profits and losses on the simplified cash basis, generally, income is recognised when it is received by the business-owner and expenses are recognised when they are paid by the business-owner. This means that post-cessation receipts and expenses are common under this basis of assessment, since the income and expenses are not accrued in the final tax year of the property business. See the Simplified cash basis for small unincorporated businesses guidance note.

This guidance note discusses post-cessation receipts and expenses from a trade. The rules for post-cessation receipts and expenses from a property business are broadly the same but the underlying legislative basis is different. These rules are discussed in the Post-cessation receipts and expenses of a property business guidance note.

Post-cessation receipts

If any trading income arises to a trader post-cessation which has not already been assessed, this is taxed in the tax year in which the income is received (ie the arising basis). Relief is available for any post-cessation expenses not already relieved that are incurred in the same tax year and would have been allowed had the trade, profession or vocation continued (see below).

ITTOIA 2005, s 242

Where the trading profits and losses were calculated under the accruals basis, the most common example of post-cessation receipts is the recovery of old debts which had previously been written

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