Section 98: Acquisition of trade: receipts from transferor’s trade
399.This section sets out what happens if a successor to a trade receives a sum that arose from the trade when it was carried on by the predecessor. It is based on section 106(2) of ICTA.
400.If a sum arises from a trade that has ceased, the usual rule is that the sum is a post-cessation receipt (see Chapter 18 of Part 2 of this Act). But, if the right to receive the sum is transferred with the trade to a person who takes over the trade, this section applies instead.
401.Subsection (2) treats the sum as a receipt of the successor’s trade. It is not charged on the predecessor. The source legislation applies “for all purposes”. This section applies for income tax purposes. Section 106(2) of ICTA (as amended by paragraph 85 of Schedule 1 to this Act) applies for corporation tax purposes. Section 37(1) of TCGA ensures that any sums received as a result of the transfer are not charged to capital gains tax.
402.Subsection (3) makes it clear that the sum is not treated as a post-cessation receipt.
403.Different rules apply if the right to receive sums is transferred to a person who does not take over the trade (see section 251 of this Act).
