BIM80510 - Post-cessation receipts: Receipts chargeable - ICTA88/S103
Profits computed on earnings basis
The principal effect of ITTOIA/S242 and CTA09/S188 has been to make obsolete the cases of Purchase v Stainer's Executors [1951] 32TC367, and Carson v Cheyney's Executor [1958] 38TC240, and thereby to bring into charge sums of a royalty nature - or otherwise dependent on results - which arise after a literary or artistic profession (for example, author, composer, dramatist, actor or producer) or the business of a company of, for example, film producers, has been discontinued, whether by death or otherwise (see also, in this connection, BIM50700 onwards).
Other examples of receipts chargeable under ITTOIA/S242 and CTA09/S188are:
- commission from orders secured by a manufacturer's agent arising after the discontinuance of the trade,
- recovery of a bad debt where bad debt relief had been given in the pre-cessation period.
It should be borne in mind that the continuance of receipts of the kind described above may, in some cases, mean that the trade etc is being continued. Thus, the profession of an author is not necessarily discontinued when he ceases to write professionally (unless as a consequence of his death).
As regards the transfer of the right to receive a sum which is chargeable under ITTOIA/S242 and CTA09/S188, see BIM80530.
