Paragraph 94: section 113 of ICTA
3408.This paragraph omits section 113 of ICTA and the section is repealed in Schedule 3 to this Act.
3409.Section 113(1) of ICTA applies to trade profits. But it is extended to property businesses by section 21B of ICTA. It ensures that a trade is treated as ceasing when there is a change in the persons carrying it on. The need for the rule arises from the fact that some rules in ICTA are expressed in terms of the commencement and cessation of a trade, rather than the position of the person carrying it on.
3410.The rewritten basis period rules in Chapter 15 of Part 2 of this Act are expressed in terms of the person carrying on the trade. Other rules that depend on the commencement or cessation of a trade are also rewritten in terms of the person carrying on the trade.
3411.So there is no need for a special rule deeming there to be a cessation where the trade is carried on by a successor.
3412.In many cases, a rule in ICTA is explicit that a change in the persons carrying on a trade to which section 113(1) of ICTA applies is to be treated as a cessation for the purposes of the rule: for instance, the post-cessation receipts rules in sections 103 to 109A of ICTA (see section 110(2)(a) of ICTA).
3413.In other cases there is no explicit indication that section 113(1) of ICTA applies to treat the trade as ceasing. In each of the following sections the rewritten rule makes it clear that the trade is not treated as ceasing unless there is a complete change in the persons carrying it on. This retains the effect of section 113(1) of ICTA as limited by section 113(2):
Section 77: Payments in respect of employment wholly in employer’s trade;
Section 79: Additional payments;
Section 173: Valuation of trading stock on cessation; and
Section 182: Valuation of work in progress on cessation.
3414.Section 113(6) of ICTA deals with the death of a taxpayer. It ensures that on the death of a person carrying on a trade the necessary cessation adjustments can be made and the tax collected from the personal representatives.
3415.The rule in the subsection dates from the time when adjustments on cessation could involve not only an adjustment for the year of death (the assessment for which might already have been made on a previous year basis) but also adjustments to the two previous years to increase the amount of the assessments to the profits of those years on a current year basis.
3416.Under Self Assessment any return of income for the year of death will naturally take account of the death. And there is no question of adjusting assessments for previous years on account of the death.
3417.The general rule in section 74 of TMA (that the personal representatives inherit the tax liabilities of the deceased) is enough. There is no need for the special rule in section 113(6) of ICTA for trade profits (or property income, to which it is applied by section 21B of ICTA).
3418.See also the commentary on the repeal of section 60(4) of ICTA.
