Income Tax (Trading and Other Income) Act 2005 section 246

Basic meaning of "post-cessation receipt"

Section 246 defines what a "post-cessation receipt" means and explains how this concept applies to partnerships and businesses using the cash basis of accounting.

• A post-cessation receipt is any sum received after a person permanently stops carrying on a trade, where that sum arises from the trade carried on before it ceased.
• A company ceasing to be within the charge to corporation tax in respect of a trade is treated as permanently ceasing to carry on that trade, meaning subsequent receipts from it may be charged to income tax.
• If the cash basis of accounting applied immediately before the trade ceased, a sum is only treated as a post-cessation receipt if it would have been brought into account as trading income on the cash basis had it been received while the trade was still running.
• When a partner leaves a firm and permanently ceases carrying on the notional trade, that partner is treated as having permanently ceased the trade, so any subsequent sums arising from it may be taxable as post-cessation receipts.