The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Statutory references to ITTOIA 2005 relate to unincorporated businesses, and CTA 2009 relate to companies unless otherwise stated.
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 expenditure 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.
See also Simon’s Taxes Division B2.8 for more details on post-cessation receipts and expenses.
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).
Where the trading profits and losses were calculated under the accruals basis, the most common example of post-cessation receipts is the recovery
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
‘Bed and breakfasting’ was the pre-1998 practice of selling shares and repurchasing them the following day. This technique can still be used in a modified form to achieve capital gains tax (CGT) savings for current or future tax years using:•a spouse / civil partner•a self-invested pension plan
OutlineFor income and capital gains tax purposes, partnerships are regarded as being tax transparent ― ie they are not taxed in their own right but instead taxation is applied to the partners.Accordingly, if the partners are individuals, then much the same considerations apply as for an individual
Trust property, which is the subject of a qualifying interest in possession (QIIP), may become chargeable to inheritance tax on the following occasions:•on the death of the beneficiary with the interest in possession•on the death of the beneficiary within seven years after a transfer or lifetime
What is transfer pricing?Transfer pricing is the prices at which an enterprise transfers either physical goods, intangible property or services, including financing arrangements, to associated enterprises. Generally, enterprises are associated if there is direct or indirect control by one of the