Income Tax (Trading and Other Income) Act 2005 section 252

Transfer of trading stock or work in progress

Section 252 excludes from the tax charge on post-cessation receipts any sums arising from the transfer of trading stock or work in progress when a person permanently ceases to carry on a trade.

• Sums from transferring trading stock or work in progress on cessation are not post-cessation receipts, provided a proper valuation has been brought into account under the stock and work in progress valuation rules
• Trading stock must always be valued at cessation, so its value is already reflected in the final trading profit calculation before the trade ends
• Work in progress is only valued at cessation where the business prepares accounts on the earnings basis; where it does not (for example, barristers and advocates), receipts from work in progress after cessation remain taxable as post-cessation receipts
• Where the taxpayer elects to value work in progress at cost rather than at full value, the profit element received later for that work in progress can still be taxed as a post-cessation receipt