BIM80715 - Post-cessation receipts: expenses: relief available under ICTA88/S109A: outline and background

Relief applies to expenses on or after 29 November 1994

FA95/S90 inserted Section 109A into Income and Corporation Taxes Act 1988. ICTA88/S109A relieves particular post-cessation expenses that relate directly to the activities of a discontinued business carried on by an individual (but not a company). The expenses covered by the relief include for example the costs of remedying defective work done while the business continued, professional indemnity insurance and damages payments. The Section also provides for the relief of debts which were taken into account in computing the taxable profits of the business prior to cessation, but which are proved bad after cessation. Relief is available for qualifying payments on or after 29.11.94 against income of the year of assessment in which the payment is made, and also against capital gains of that year to the extent that relief is not available against income.

The individual has to make a claim for relief.

Before Section 109A was introduced, no relief was available for expenses incurred after a business ceased unless they were provided for in the final accounts or there were post- cessation receipts against which the expenditure could be set (see BIM80501 onwards).