BIM80520 - Post-cessation receipts: Receipts chargeable - ICTA88/S104

Profits computed on conventional basis

Conventional basis is defined in ICTA88/S110 and ICTA88/S103 (2) to mean any basis which is not an earnings basis.

ICTA88/S104, charges to tax under Schedule D certain receipts arising from the carrying on of a trade etc where accounts have been submitted for tax purposes on a “conventional” basis. A conventional basis is a basis other than the earnings basis as defined in ICTA88/S110 (3), (see BIM80505, second sub-para), for example, where the accounts of a professional man have been drawn up on a “cash” basis or on the basis of bills issued. The Section provides for the taxation of the following receipts:

  • Under sub-sections (1) and (2).
Sums received after the trade, profession or vocation is discontinued (or treated for tax purposes as discontinued) and not brought into account for tax purposes during the life of the business. The provisions of ICTA88/S104 (1)-(3) will apply only if the business was discontinued on or after 19 March 1968.
  • For a change of accounting basis before 5 April 1999 under sub-section (4).
Sums received during the life of the business but falling out of account for tax purposes following a change of accounting basis:
i) from a conventional basis to the earnings basis, or
ii) from one conventional basis to another.
Sub-sections (4) and (5) will apply in all cases where the accounting basis was changed after 18 March 1968. It will also apply in cases where the date of change was before 19 March 1968, unless-
  • the business was discontinued before 19 March 1968, or
  • the decision to make the change was made before 19 March 1968.

Note: Sub-section (4) will not operate in cases where, within the earnings basis, there is merely a change in the principles upon which a particular item is dealt with in the accounts. Subsections (4) and (5) were repealed by FA98 for changes of accounting basis taking effect after 5 April 1999.

For individuals born before 6t h April 1917 partial relief from S104 tax is given by ICTA88/S109 see BIM80701 onwards.

As regards the transfer of the right to receive a sum chargeable under ICTA88/S104, see BIM80530.

See also, BIM51101 as regards barristers.

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