Income Tax (Trading and Other Income) Act 2005 section 251

Transfer of rights if transferee does not carry on trade

Section 251 deals with the tax treatment of a person who permanently ceases trading and sells the right to receive future business income to someone who does not carry on the trade.

• When a trader permanently stops trading and sells the right to collect future income from the business to a non-trading buyer, the seller is treated as receiving a taxable post-cessation receipt
• If the sale is at arm's length, the taxable amount is the actual consideration received; if not at arm's length, it is the open market value of the rights transferred
• Any sums the buyer subsequently collects under those rights are not treated as post-cessation receipts, so there is no further tax charge on the buyer
• This section is overridden by separate rules for transfers of trading stock or work in progress (section 252) and lump sums paid to personal representatives for copyright and similar rights (section 253)