Income Tax (Trading and Other Income) Act 2005

Deductions U.K.

254 Allowable deductions U.K.

(1) In calculating the amount on which tax is charged under this Chapter, deductions are allowed in accordance with—

(a) this section, and

(b) section 255,

from the amount which would otherwise be chargeable to tax under this Chapter.

(2) A deduction is allowed for a loss, expense or debit which, if the person carrying on the trade had not permanently ceased to do so—

(a) would have been deducted in calculating the profits of the trade for income or corporation tax purposes, or

(b) would have been deducted from or set off against the profits of the trade for income or corporation tax purposes,

but no deduction is allowed if the loss, expense or debit arises directly or indirectly from the cessation itself.

[F1 (2A) If, immediately before the person permanently ceases to carry on the trade, an election under section 25A (cash basis for small businesses) has effect in relation to the trade, assume for the purposes of subsection (2) that such an election has effect in relation to the trade.]

[F2 (2B) If—

(a) the loss or expense is incurred, or the debit arises, in relation to a vehicle, and

(b) immediately before the person permanently ceases to carry on the trade, section 94D (deduction allowable at fixed rate for expenditure on vehicles) applies in relation to the vehicle,

assume for the purposes of subsection (2) that that section applies in relation to the vehicle.]

(3) No deduction for an amount is allowed under this section if the amount has been allowed—

(a) under any other provision of the Tax Acts, or

(b) as a result of [F3 section 261D of TCGA 1992] (capital gains tax relief for post-cessation expenditure).

Textual Amendments

F1 S. 254(2A) inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 39(3)

F2 S. 254(2B) inserted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by Finance Act 2013 (c. 29), Sch. 5 para. 4

F3 Words in s. 254(3)(b) substituted (6.4.2007 with effect as noted in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 505 (with transitional provisions and savings in Sch. 2)

255 Further rules about allowable deductions U.K.

(1) An amount may not be deducted more than once under section 254.

(2) A deduction under that section of a loss must be made from post-cessation receipts charged for an earlier tax year in preference to those charged for a later tax year.

(3) But this does not authorise the deduction of a loss from post-cessation receipts charged for a tax year before the tax year in which the loss is made.

(4) No deduction may be made under section 254 from any amount that is treated as a post-cessation receipt under—

(a) section 248(4) (debts paid after cessation), or

(b) section 250 (receipts relating to post-cessation expenditure).