Post cessation transactions

Posted on 18th June 2024 by Streets Corporation Tax


Image to represent Post cessation transactions

Tax relief may be available for post-cessation expenses of a trade. To be an allowable post-cessation expense the trade must have ceased and the expense must have been deductible in calculating the trading profits.

This means that the expense still has to meet the wholly and exclusively test and be revenue, not capital, expenditure. The expenditure can be apportioned if necessary. The way in which post-cessation expenses can be relieved depends on the person incurring the expenditure and the type of expenditure involved.

The following are examples of expenses that would likely be categorised as post-cessation expenses:

  • remedying defective work done, goods supplied, or services rendered while the business was continuing or as damages in respect of such defective work, goods or services whether awarded by a Court or agreed during negotiations on a claim;
  • paying legal or other professional expenses incurred in connection with the costs above;
  • insuring against liabilities arising out of any such claim or against the incurring of such expenses; and
  • collecting, or seeking to collect, debts which were taken into account in computing the profits of the trade before discontinuance.

An expense specifically relating to the cessation itself is not an allowable deduction for tax purposes.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


Taxation of double cab pick-ups

The tax treatment of double cab pick-up vehicles (DCPUs) has been clarified as part of the recent Budget announcements. This follows a chequered history of the tax treatment of DCPUs after a 2020 Court of Appeal judgment and after the previous


Relief for company tax losses

Corporation Tax relief may be available when a company or organisation incurs a trading loss, a loss on the sale or disposal of a capital asset, or on property income. Tax relief may be available to reduce Corporation Tax by offsetting it against


Carry forward a company trading loss

There are a significant number of reliefs available to businesses that suffer losses. Certain losses that your company has not used in any other way can be carried forwards against profits in future accounting periods. In general, a company can carry

You might also be interested in...