Chapter 10: Post-cessation receipts
Overview
1411.This Chapter applies the rules about post-cessation receipts to property businesses, broadly as they apply to trades. The main rules for trades are in Chapter 18 of Part 2 of this Act. The application of the rules to property businesses is based on section 21B of ICTA, which specifically mentions sections 103 to 106 of ICTA.
1412.Section 65A(5) of ICTA provides that “the income from an overseas property business shall be computed … in accordance with the rules applicable to the computation of the profits of a Schedule A business”.
1413.Although the post-cessation receipt rules apply to a Schedule A business, they do so by virtue of section 21B of ICTA. That section deals with “other rules applicable to Case I of Schedule D”. On the other hand, section 21A of ICTA deals with rules about the computation of profits of a trade. So section 65A of ICTA imports only the computation rules in section 21A and the post-cessation receipt rules do not apply to an overseas property business.
1414.The following trading income rules (in Chapter 18 of Part 2 if this Act) cannot apply to a property business. So there is no corresponding rule in this Chapter:
Section 241: Professions and vocations;
Section 252: Transfer of trading stock or work in progress; (A property business cannot have trading stock or work in progress.)
Section 253: Lump sums paid to personal representatives for copyright etc; (Such sums cannot arise from a property business.) and
Section 256: Treatment of post-cessation receipts. (Property income cannot be relevant UK earnings or earned income.)
1415.The following trading income rules apply to property businesses but are not in separate sections in this Chapter:
Sections 248, 249 and 250: Rules about debts and post-cessation expenditure; (These rules are applied by section 354(2).)
Sections 254 and 255: Allowable deductions; (These rules are applied by section 351(2)(a).) and
Section 257: Election to carry back. (This rule is applied by section 351(2)(b).)
Section 349: Charge to tax on post-cessation receipts
1416.This section charges post-cessation receipts to tax. It is based on sections 103 and 104 of ICTA, as applied by section 21B.
Section 350: Extent of charge to tax
1417.This section restricts the charge on the post-cessation receipts. It is based on sections 103 and 104 of ICTA.
Section 351: Income charged
1418.This section sets out the amount charged to tax. In ICTA the charge is under Schedule D Case VI. So section 69 of ICTA applies.
Section 352: Person liable
1419.This section states who is liable for any tax charged. In ICTA the charge is under Schedule D Case VI. So section 59(1) of ICTA applies.
Section 353: Basic meaning of “post-cessation receipt”
1420.This section defines post-cessation receipts of a property business. It is based on sections 103 and 104 of ICTA, as applied by section 21B of ICTA.
1421.Subsections (2) and (3) set out the position if a property business is carried on in partnership. It is based on section 110(2) (and sections 111 and 113) of ICTA. A partner who leaves a firm may receive a post-cessation receipt that is charged to tax.
Section 354: Other rules about what counts as a “post-cessation receipt”
1422.This section brings together signposts to rules that operate so as to treat certain sums as post-cessation receipts and to exclude others from the charge. It is new.
1423.Subsection (1) is a signpost to the section that deals with the transfer of a right to receive a post-cessation receipt to a person who does not carry on a property business.
1424.Subsection (2) lists the trading income rules that apply to create post-cessation receipts for the purpose of this Chapter.
1425.Subsection (3) draws attention to the rule in Chapter 5 of this Part of the Act that treats a sum received as not being a post-cessation receipt if the right to it was transferred with a property business. It also mentions the rule in Part 8 of this Act that can treat profits of an overseas property business as post-cessation receipts if they become remittable after the taxpayer has ceased to carry on the business.
Section 355: Transfer of rights if transferee does not carry on UK property business
1426.This section sets out the positions of the transferor and transferee if the right to a post-cessation receipt is transferred for value. It is based on section 106 of ICTA, as applied by section 21B of ICTA.
Section 356: Application to Schedule A businesses
1427.This section deals with the case of a person who receives a sum that arises from a Schedule A business that was carried on before 2005-06. It is new.
1428.Subsection (1) sets out the general rule. The business from which a sum arises for the purpose of section 353 may be either a UK property business (as defined in this Act for 2005-06 and later years) or a Schedule A business. The Schedule A business may be one carried on by an income tax payer before 2005-06 or one carried on by a company.
1429.Subsection (2) deals with the case of a non-resident company liable to income tax. If a company ceases to be liable to corporation tax it is treated as ceasing to carry on its Schedule A business. A post-cessation from that business may be charged to income tax.
