Income Tax (Trading and Other Income) Act 2005 section 98

Acquisition of trade: receipts from transferor's trade

Section 98 deals with the tax treatment of sums received by a person who takes over a trade, where those sums arose from the trade when it was carried on by the previous owner.

• When a trader permanently ceases trading and transfers the right to receive outstanding trade income to a successor who then carries on the trade, special rules apply
• Sums received by the successor as a result of the transfer are taxed as receipts of the successor's trade in the period they are received, provided they were not already accounted for in the predecessor's tax calculations before cessation
• These sums are not treated as post-cessation receipts of the original trader, even though they arose before the trade ceased
• Different rules apply where the right to receive sums is transferred to someone who does not continue the trade