BIM80540 - Post-cessation receipts: election for year/cessation: ICTA88/S108

Income within ICTA88/S103 and ICTA88/S104 is chargeable under Case VI on a current year basis as the receipts come in. The trader, or his personal representatives, may elect, however, as regards any particular sum or sums received within the six years of assessment following that in which the discontinuance or change of accounting basis took place, that such sum or sums shall be charged as if the sum or sums were received on the date on which the discontinuance or change took place. Any such election must be made before the end of the second year of assessment following that in which the sum was received. If an election is made, the normal time limits will cease to apply for the purpose of making the assessment.

The election under S108 only determines when the amount should be assessed and does not affect the computation of the amount chargeable. This is computed under the rules in S103 and 104, subject to the deductions in S105. The amount of tax is then computed by reference to tax rates and allowances of the earlier year. This was confirmed in Gilmore v Inspector of Taxes SCD269.

ICTA88/S108 - carry back claim under SA

TMA70/SCH1B/PARA5 directs that in giving effect to a carry back claim under ICTA88/S108 under SA, the claim should be made in the assessment for the year the post-cessation sum is received, not in the assessment for the earlier year when the discontinuance or change occurred. The amount of tax in the year of the post-cessation receipt is increased by the difference between the amount chargeable to tax for the year of discontinuance or change, and the amount that would be charged if effect were given to the carry back claim in the year of discontinuance or change.