Income Tax (Trading and Other Income) Act 2005 section 254

Allowable deductions

Section 254 sets out the rules for deducting losses, expenses and debits from amounts that would otherwise be taxable as post-cessation receipts after a trade has permanently ceased.

• Deductions are allowed for losses, expenses or debits that would have been deductible against trading profits had the trade not ceased, but not if they arise directly or indirectly from the cessation itself
• Where the cash basis applied to the trade immediately before cessation, it is assumed to continue applying for the purpose of determining allowable deductions
• Where section 94D (fixed-rate vehicle expenditure deductions) applied to a vehicle immediately before cessation, it is assumed to continue applying for the purpose of determining allowable deductions
• No deduction is allowed under this section if relief for the same amount has already been given under any other provision of the Tax Acts or under section 261D of the Taxation of Chargeable Gains Act 1992