Income Tax (Trading and Other Income) Act 2005 section 242

Charge to tax on post-cessation receipts

Section 242 establishes that income tax is charged on receipts arising from a trade after that trade has permanently ceased.

• Income tax applies to amounts received after a trade has stopped operating
• These receipts are known as "post-cessation receipts" and relate to the former trade
• Post-cessation receipts are taxed separately from the normal trading profits of a business
• The charge ensures that income connected to a former trade does not escape taxation simply because the trade has ended