BIM80500 - Post cessation receipts: Contents

This guidance looks at the taxation of post-cessation receipts of a trade.

It is important to note that there is no requirement in the legislation that the person who receives the post cessation receipt is the one who carried on the trade in question; the tax liability is on the person who gets the receipt.

This guidance looks at the tax treatment that should be applied where the source (that is the person earning the income or the trade or business) had, for whatever reason ceased.

This is neatly illustrated in the case of Purchase v Stainer’s Executors [1951] 32TC367.

The executors received income from three films made by the actor Leslie Howard (after his death). It was held that this remained income from his professional activities even after his death. Although no assessment under Case II of Schedule D could be made, as Leslie Howard had died (that is the source ceased), these earnings remained income from the professional services and did not become income arising from the contracts entered into. Lord Simonds said at page 411:

How else could these sums come to the hands of Mr Howard or his executors than as the remuneration for his professional activities, the reward for services rendered by him during his life and unpaid for at his death? It appears to me wholly irrelevant that they were not payable until after his death and equally so that they were not and could not be quantified until after that event. They retained the essential quality of being the fruit of his professional activity. If in all the circumstances it was not possible to bring the sums into account in the years in which they were earned, as I will assume to be the case, the result is not to change the character of the payment.

This chapter contains the following: