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In force since 2026-07-15, as the publisher states.
Copy read on 2026-11-08. The page it was read from
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.
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For the purposes of this Chapter a person carrying on a trade enters the cash basis for a tax year if— (a) the cash basis applies in relation to the trade for the tax year, and (b) immediately before the beginning of ... the tax year, the cash basis does not apply in relation to the trade.
Propose a change(1) This section applies if— (a) a person carrying on a trade enters the cash basis for a tax year (“the current tax year”), and (b) at the end of ... the previous tax year, the person has unrelieved qualifying expenditure relating to the trade to carry forward from the chargeable period ending in that tax year. (2) But this section does not apply if section 240D (assets not fully paid for) applies. (3) In calculating the profits of the trade for the current tax year, a deduction is allowed for any cash basis deductible amount of the expenditure. (4) A “cash basis deductible amount” of the expenditure means any amount of the expenditure for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the current tax year. (5) Any cash basis deductible amount of the expenditure is to be determined on such basis as is just and reasonable in all the circumstances. (5A) For the purposes of subsection (1)(b), in determining the unrelieved qualifying expenditure the person has to carry forward, disregard sections 59(4), 461A(1) and 475A(1) of CAA 2001 (which provide that an amount is not to be carried forward as unrelieved qualifying expenditure when a person enters the cash basis). (6) In this section “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of— (a) Part 2 of CAA 2001 (see section 59(1) and (2) of that Act), (b) Part 7 of that Act (see section 461 of that Act), or (c) Part 8 of that Act (see section 475 of that Act).
Propose a change(1) This section applies if a person carrying on a mineral extraction trade enters the cash basis for a tax year (“the current tax year”). (2) But this section does not apply if section 240D applies. (3) In calculating the profits of the trade for the current tax year, a deduction is allowed for any amount of expenditure— (a) which would, apart from section 419A(1) of CAA 2001, have been unrelieved qualifying expenditure for the current tax year, and (b) for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the current tax year. (4) In this section— “mineral extraction trade” has the meaning given in section 394 of CAA 2001; “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of Part 5 of CAA 2001 (see section 419 of that Act).
Propose a change(1) This section applies if— (a) a person carrying on a trade enters the cash basis for a tax year, (b) at any time before the beginning of ... that tax year the person has incurred relevant expenditure, and (c) not all of the relevant expenditure has actually been paid by the person. (1A) “Relevant expenditure” means expenditure— (a) for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the tax year, and (b) in respect of which the person has obtained capital allowances under Part 2, 5, 6, 7 or 8 of CAA 2001. (2) If the amount of the relevant expenditure that the person has actually paid exceeds the amount of capital allowances given in respect of the relevant expenditure, the difference is to be deducted in calculating the profits of the trade for the tax year. (3) If the amount of the relevant expenditure that the person has actually paid is less than the amount of capital allowances given in respect of the relevant expenditure, the difference is to be treated as a receipt in calculating the profits of the trade for the tax year. (4) Any question as to whether or to what extent expenditure is relevant expenditure, or as to whether or to what extent any capital allowance obtained is in respect of relevant expenditure, is to be determined on such basis as is just and reasonable in all the circumstances. (5) If the amount of capital allowances given under Part 2 of CAA 2001 in respect of the relevant expenditure has been reduced under section 205 or 207 of CAA 2001 (reduction where asset provided or used only partly for qualifying activity), the amount of the relevant expenditure that the person has actually paid is to be proportionately reduced for the purposes of this section. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Propose a change(1) This section applies if— (a) a person carrying on a trade enters the cash basis for a tax year, (b) the person is the successor for the purposes of section 266 of CAA 2001, and (c) as a result of an election under section 267 of that Act, relevant plant or machinery is treated as sold by the predecessor to the successor at any time during ... the tax year. (2) The provisions of this Chapter have effect in relation to the successor as if everything done to or by the predecessor had been done to or by the successor. (3) Any expenditure actually incurred by the successor on acquiring the relevant plant or machinery is to be ignored for the purposes of calculating the profits of the trade for the tax year. (4) In this section “the predecessor” and “relevant plant or machinery” have the same meaning as in section 267 of CAA 2001.
Propose a changeThe provisions of this Chapter apply to professions and vocations as they apply to trades.
Propose a changeIncome tax is charged on post-cessation receipts arising from a trade.
Propose a change(1) A post-cessation receipt is chargeable to tax under this Chapter only so far as it is not otherwise chargeable to income or corporation tax. (2) Accordingly, a post-cessation receipt arising from a trade is not chargeable to tax under this Chapter so far as it is brought into account in calculating the profits of the trade for any period. (3) A post-cessation receipt is not chargeable to tax under this Chapter if— (a) it is received by or on behalf of a non-UK resident who is beneficially entitled to it, and (b) it represents income arising outside the United Kingdom. (4) A post-cessation receipt is not chargeable to tax under this Chapter if it arises from a trade carried on wholly outside the United Kingdom, other than a person's trade of dealing in or developing UK land. (5) A post-cessation receipt is not chargeable to tax under this Chapter in the case of a partner in a firm if— (a) it represents income arising outside the United Kingdom from a trade carried on by the firm, and (b) the partner's share of the firm's income arising out of the United Kingdom is treated as relevant foreign income by section 857(3) (partners to whom the remittance basis applies). (6) If the tax year is a split year as respects a UK resident individual, this section has effect as if, for the overseas part of that year, the individual were non-UK resident.
Propose a change(1) Tax is charged under this Chapter on the full amount of the receipts received in the tax year. (2) This is subject to— (a) sections 254 and 255 (allowable deductions), and (b) section 257 (election to carry back).
Propose a changeThe person liable for any tax charged under this Chapter is the person receiving or entitled to the receipts.
Propose a change(1) In this Part “post-cessation receipt” means a sum— (a) which is received after a person permanently ceases to carry on a trade, and (b) which arises from the carrying on of the trade before the cessation. (2) For this purpose the reference to a person permanently ceasing to carry on a trade includes a reference to a company ceasing to be within the charge to corporation tax in respect of a trade. (2A) If, immediately before a person permanently ceases to carry on a trade, the cash basis applies in relation to the trade, a sum is to be treated as a post-cessation receipt only if it would have been brought into account in calculating the profits of the trade on the cash basis had it been received at that time. (3) Subsection (4) applies if— (a) a firm carries on a trade, and (b) a person ceases to be a partner in the firm, ... (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) The partner is treated for the purposes of this Chapter as permanently ceasing to carry on the trade.
Propose a change(1) The following provisions treat certain amounts as post-cessation receipts for the purposes of this Part— section 82(6) (contributions to local enterprise organisations or urban regeneration companies), section 104(3) (distribution of assets of mutual concerns), section 109(2) (receipt by donor or connected person of benefit attributable to certain gifts), section 185(1) (election for valuation at cost), section 248 (debts paid after cessation), section 249 (debts released after cessation), as qualified, where appropriate, by section 48(4) (car ... hire), section 250 (receipts relating to post-cessation expenditure), section 251 (transfer of rights if transferee does not carry on trade), and section 844 (income charged on withdrawal of relief after source ceases: unremittable income). (2) Section 98 (acquisition of trade: receipts from transferor's trade) and section 251 (transfer of rights if transferee does not carry on trade) treat certain amounts as not being post-cessation receipts for the purposes of this Part.
Propose a change(1) Subsection (2) applies if, in calculating the profits of a trade for income or corporation tax purposes, a deduction is made in respect of a debt under— (a) section 35 (bad and doubtful debts), or (b) section 74(1)(j) of ICTA (corresponding corporation tax provision), and a person permanently ceases to carry on the trade. (2) A sum received after the cessation is treated as a post-cessation receipt so far as the deduction is made. (3) Subsection (4) applies if relief is given under section 96 of ITA 2007(relief for post-cessation expenditure) as a result of subsection (1)(b) of that section in respect of a debt owed to a person who has permanently ceased to carry on a trade. (4) A sum received by the person in payment of the debt is treated as a post-cessation receipt so far as relief is given in respect of the sum.
Propose a change(1) This section applies if— (a) in calculating the profits of a trade for any period for income or corporation tax purposes, a deduction is allowed for the expense giving rise to a debt owed by the person who carried on the trade, (b) the person has permanently ceased to carry on the trade at or after the end of that period, (c) after the cessation, all or part of the debt is released, and (d) the release is not part of a statutory insolvency arrangement. (2) The amount released is treated as a post-cessation receipt. (3) For the purposes of this section the reference to a person permanently ceasing to carry on a trade includes a reference to a company ceasing to be within the charge to corporation tax in respect of a trade.
Propose a change(1) This section applies if a person who has permanently ceased to carry on a trade makes a payment in circumstances where relief is available under section 96 of ITA 2007(relief for post-cessation expenditure). (2) The following sums are treated as post-cessation receipts— (a) in the case of a payment within section 97(2) or (3) of ITA 2007(payment to remedy defective work etc. or to defray expenses of a claim), the proceeds of insurance, or other sum received, for the purpose of enabling the payment to be made or by means of which it is reimbursed, (b) in the case of a payment within section 97(4) of ITA 2007(payment to insure against claims for defective work etc.), a refund of the premium, or other sum received, in connection with the insurance, and (c) in the case of a payment within section 97(5) of ITA 2007(payment for the purpose of collecting a debt), any sum received towards the cost of collecting the debt. (3) If a sum mentioned in subsection (2) is received in a tax year earlier than the tax year in which the related payment is made, it is treated as having been received in the later tax year (and not the earlier tax year). (4) Any adjustment required to give effect to subsection (3) is to be made by way of— (a) amendment of an assessment, or (b) discharge or repayment of tax.
Propose a change(1) This section applies if— (a) a person (“the transferor”) permanently ceases to carry on a trade, (b) the transferor transfers to another person (“the transferee”) for value the right to receive sums arising from the carrying on of the trade, and (c) the transferee does not subsequently carry on the trade. (2) The transferor is treated as receiving a post-cessation receipt. (3) The amount of the receipt is— (a) the amount or value of the consideration for the transfer, if the transfer is at arm's length, or (b) the value of the rights transferred as between parties at arm's length, if the transfer is not at arm's length. (4) Any sums mentioned in subsection (1)(b) which are received after the cessation of the trade are not post-cessation receipts. (5) This section is subject to— (a) section 252 (transfer of trading stock or work in progress), and (b) section 253 (lump sums paid to personal representatives for copyright etc.).
Propose a change(1) When a person permanently ceases to carry on a trade, a sum realised by— (a) the transfer of trading stock, or (b) the transfer of work in progress, is not a post-cessation receipt if a valuation of the stock or work is brought into account in accordance with Chapter 12 (valuation of stock and work in progress). (2) This does not prevent a sum from being treated as a post-cessation receipt as a result of an election under section 185 (election for valuation of work in progress at cost). (3) In this section— (a) “trading stock” has the meaning given by section 174, and (b) “work in progress” and “transfer of work in progress” have the meaning given by section 183.
Propose a change(1) A lump sum which is paid to the personal representatives of the author of a literary, dramatic, musical or artistic work as consideration for the assignment by them of— (a) the copyright in the work, or (b) the public lending right in the work, is not a post-cessation receipt. (2) A lump sum which is paid to the personal representatives of the designer of a design in which design right subsists as consideration for the assignment by them of that right is not a post-cessation receipt. (3) For the purposes of this section it does not matter whether the whole or a part of the right is assigned.
Propose a change(1) In calculating the amount on which tax is charged under this Chapter, deductions are allowed in accordance with— (a) this section, and (b) section 255, from the amount which would otherwise be chargeable to tax under this Chapter. (2) A deduction is allowed for a loss, expense or debit which, if the person carrying on the trade had not permanently ceased to do so— (a) would have been deducted in calculating the profits of the trade for income or corporation tax purposes, or (b) would have been deducted from or set off against the profits of the trade for income or corporation tax purposes, but no deduction is allowed if the loss, expense or debit arises directly or indirectly from the cessation itself. (2A) If, immediately before the person permanently ceases to carry on the trade, the cash basis applies in relation to the trade, assume for the purposes of subsection (2) that the cash basis applies in relation to the trade. (2B) If— (a) the loss or expense is incurred, or the debit arises, in relation to a vehicle, and (b) immediately before the person permanently ceases to carry on the trade, section 94D (deduction allowable at fixed rate for expenditure on vehicles) applies in relation to the vehicle, assume for the purposes of subsection (2) that that section applies in relation to the vehicle. (3) No deduction for an amount is allowed under this section if the amount has been allowed— (a) under any other provision of the Tax Acts, or (b) as a result of section 261D of TCGA 1992 (capital gains tax relief for post-cessation expenditure).
Propose a change(1) An amount may not be deducted more than once under section 254. (2) A deduction under that section of a loss must be made from post-cessation receipts charged for an earlier tax year in preference to those charged for a later tax year. (3) But this does not authorise the deduction of a loss from post-cessation receipts charged for a tax year before the tax year in which the loss is made. (4) No deduction may be made under section 254 from any amount that is treated as a post-cessation receipt under— (a) section 248(4) (debts paid after cessation), or (b) section 250 (receipts relating to post-cessation expenditure).
Propose a change(1) This section applies if— (a) an individual has permanently ceased to carry on a trade, and (b) the income arising to the individual from the trade was . . . relevant UK earnings within section 189(2)(b) of FA 2004. (2) Any post-cessation receipts arising to the individual from the trade are similarly . . . relevant UK earnings.
Propose a change(1) This section applies if a post-cessation receipt is received by a person (or a person's personal representatives) in a tax year beginning no later than 6 years after the person permanently ceased to carry on the trade. (2) The person (or the person's personal representatives) may elect that the tax chargeable in respect of the receipt is to be charged as if the receipt had been received on the date of the cessation. (3) But this is subject to paragraph 5 of Schedule 1B to TMA 1970 (election given effect in the tax year in which the receipt is actually received). (4) The election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.
Propose a change(1) This section applies if there is a change— (a) in the trustees of a trust, or (b) in the personal representatives of a person, at a time when they are carrying on a trade, profession or vocation. (2) For income tax purposes, the change does not result in— (a) any of the trustees or personal representatives before the change permanently ceasing to carry on the trade, profession or vocation, or (b) any of the trustees or personal representatives after the change starting to carry on the trade, profession or vocation.
Propose a changeIn this Part “statutory insolvency arrangement” means— (a) a voluntary arrangement that has taken effect under or as a result of the Insolvency Act 1986, the Insolvency (Northern Ireland) Order 1989 or schedule 4 to the Bankruptcy (Scotland) Act 2016, (b) a compromise or arrangement that has taken effect under Part 26 or 26A of the Companies Act 2006, (c) any arrangement or compromise of a kind corresponding to any of those mentioned in paragraph (a) or (b) that has taken effect under or by virtue of the law of a country or territory outside the United Kingdom.
Propose a change(1) This Part imposes charges to income tax under— (a) Chapter 3 (the profits of a UK property business or an overseas property business), (b) Chapter 7 (amounts treated as adjustment income under section 330), (c) Chapter 8 (rent receivable in connection with a UK section 12(4) concern), (d) Chapter 9 (rent receivable for UK electric-line wayleaves), and (e) Chapter 10 (post-cessation receipts arising from a UK property business)... (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Part 6 deals with exemptions from the charges under this Part. (3) See, in particular, the exemptions under sections 769 (housing grants), 777 (VAT repayment supplements) and 778 (incentives to use electronic communications). (4) The charges under Chapters 3, 7, 8, 9 and 10 apply to non-UK residents as well as UK residents but this is subject to section 269 (charges on non-UK residents only on UK source income). (5) This section needs to be read with the relevant priority rules (see sections 2 and 261).
Propose a changeAny receipt or other credit item, so far as it falls within— (a) Chapter 3 of this Part so far as it relates to an overseas property business or Chapter 8 or 9 of this Part (rent receivable in connection with a UK section 12(4) concern or for UK electric-line wayleaves), and (b) Chapter 2 of Part 2 (receipts of a trade, profession or vocation), is dealt with under Part 2.
Propose a change(1) Any receipt, so far as it falls within— (a) Chapter 3 so far as it relates to a UK property business, and (b) Chapter 8 (rent receivable in connection with a UK section 12(4) concern), is dealt with under Chapter 8. (2) Any receipt, so far as it falls within— (a) Chapter 3 so far as it relates to a UK property business, and (b) Chapter 9 (rent receivable for UK electric-line wayleaves), is dealt with under Chapter 9. (3) Any receipt, so far as it falls within Chapter 8 (rent receivable in connection with a UK section 12(4) concern) and Chapter 9 (rent receivable for UK electric-line wayleaves), is dealt with under Chapter 9.
Propose a change(1) This Chapter explains for the purposes of this Act what is meant by— (a) a person's UK property business (see section 264), and (b) a person's overseas property business (see section 265). (2) Both those sections need to be read with— (a) section 266 (which explains what is meant by generating income from land), and (b) section 267 (which provides that certain activities do not count as activities for generating income from land). (3) In the case of the property business of a firm, the basic rules in sections 264 and 265 are explained in section 859(2) and (3). (4) References in this Act to an overseas property business are to an overseas property business so far as any profits of the business are chargeable to tax under Chapter 3 (as to which see, in particular, section 269). (5) Accordingly, nothing in Chapter 4 or 5 is to be read as treating an amount as a receipt of an overseas property business if the profits concerned would not be chargeable to tax under Chapter 3. (6) In this Act “property business” means a UK property business or an overseas property business.
Propose a changeA person's UK property business consists of— (a) every business which the person carries on for generating income from land in the United Kingdom, and (b) every transaction which the person enters into for that purpose otherwise than in the course of such a business.
Propose a changeA person's overseas property business consists of— (a) every business which the person carries on for generating income from land outside the United Kingdom, and (b) every transaction which the person enters into for that purpose otherwise than in the course of such a business.
Propose a change(1) In this Chapter “generating income from land” means exploiting an estate, interest or right in or over land as a source of rents or other receipts. (2) “Rents” includes payments by a tenant for work to maintain or repair leased premises which the lease does not require the tenant to carry out. (3) “Other receipts” includes— (a) payments in respect of a licence to occupy or otherwise use land, (b) payments in respect of the exercise of any other right over land, and (c) rentcharges and other annual payments reserved in respect of, or charged on or issuing out of, land. (4) For the purposes of this section a right to use a caravan or houseboat at only one location is treated as a right deriving from an estate or interest in land.
Propose a changeFor the purposes of this Chapter the following activities are not carried on for generating income from land— (a) farming or market gardening in the United Kingdom (but see section 9 (UK farming or market gardening treated as trade)), (b) any other occupation of land (but see section 10 (certain commercial occupation of UK land treated as trade)), and (c) activities for the purposes of a concern to which section 12 applies (profits of mines, quarries etc.).
Propose a changeIncome tax is charged on the profits of a property business.
Propose a change(1) Profits of a UK property business are chargeable to tax under this Chapter whether the business is carried on by a UK resident or a non-UK resident. (2) Profits of an overseas property business are chargeable to tax under this Chapter only if the business is carried on by a UK resident. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Propose a change(1) Tax is charged under this Chapter on the full amount of the profits arising in the tax year. (2) Subsection (1) is subject to Part 8 (foreign income: special rules). (3) If, as respects an individual carrying on an overseas property business, the tax year is a split year— (a) tax is charged under this Chapter on so much of the profits referred to in subsection (1) as arise in the UK part of the tax year, and (b) the portion of the profits arising in the overseas part of the tax year is, accordingly, not chargeable to tax under this Chapter. (4) In determining how much of the profits arise in the UK part of the tax year— (a) determine first how much of the non-CAA profits arise in the UK part by apportioning the non-CAA profits between the UK part and the overseas part on a just and reasonable basis, and (b) then adjust the portion of the non-CAA profits arising in the UK part by deducting any CAA allowances for the year and adding any CAA charges for the year. (5) In subsection (4)— “CAA allowances” means allowances treated under section 250 ... of CAA 2001 (capital allowances for overseas property businesses) as an expense of the business; “CAA charges” means charges treated under that section as a receipt of the business; “non-CAA profits” means profits before account is taken of any CAA allowances or CAA charges.
Propose a changeThe person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.
Propose a change(1) The profits of a property business for a tax year must be calculated in accordance with GAAP if condition A, B, C, D or E is met. (2) Condition A is that the business is carried on at any time in the tax year by— (a) a company, (b) a limited liability partnership, (c) a corporate firm, or (d) the trustees of a trust. (3) For the purposes of subsection (2) a firm is a “corporate firm” if a partner in the firm is not an individual. (4) Condition B is that the cash basis receipts for the tax year exceed £150,000. (5) In subsection (4) “the cash basis receipts for the tax year” means the total of the amounts that would be brought into account as receipts in calculating the profits of the property business for the tax year on the cash basis (see section 271D). (6) If the property business is carried on for only part of the tax year, the sum given in subsection (4) is proportionately reduced. (7) Condition C is that— (a) the property business is carried on by an individual (“P”), (b) a share of joint property income is brought into account in calculating the profits of the business for the tax year, (c) a share of that joint property income is brought into account in calculating the profits for the tax year of a property business carried on by another individual (“Q's property business”), and (d) the profits of Q's property business for the tax year are calculated in accordance with GAAP. (8) In subsection (7) “joint property income” means income to which P and Q are treated for income tax purposes as beneficially entitled in equal shares by virtue of section 836 of ITA 2007. (9) Condition D is that— (a) an allowance under Part 3A of CAA 2001 (business premises renovation allowances) is made at any time in calculating the profits of the property business, and (b) if the profits of the business were to be calculated in accordance with GAAP for the tax year, there would be a day in the tax year on which the occurrence of a balancing event (within the meaning of that Part) would give rise to a balancing adjustment for the tax year (see section 360M of that Act). (10) Condition E is that an election under this subsection made by the person who is or has been carrying on the property business has effect in relation to the business for the tax year. (11) An election under subsection (10) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made. (12) The Treasury may by regulations— (a) amend subsection (2); (b) amend subsection (4) so as to substitute another sum for the sum for the time being specified in that subsection. (13) A statutory instrument containing regulations under subsection (12) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons. (14) Subsection (13) does not apply if the regulations omit one or more paragraphs of subsection (2) and make no other provision.
Propose a change(1) In this Part, references to calculating the profits of a property business in accordance with GAAP are to calculating the profits in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for income tax purposes. (2) A requirement under this Part to calculate profits in accordance with GAAP does not— (a) require a person to comply with the requirements of the Companies Act 2006 or subordinate legislation made under that Act except as to the basis of calculation, or (b) impose any requirements as to audit or disclosure. (3) See section 272 (application of trading income rules: GAAP) which applies only where profits are calculated in accordance with GAAP.
Propose a changeThe profits of a property business for a tax year must be calculated on the cash basis if none of conditions A, B, C, D or E in section 271A is met.
Propose a change(1) In this Part, references to calculating the profits of a property business on the cash basis are to calculating the profits in accordance with subsections (2) and (3). (2) In calculating the profits, receipts of the business are brought into account at the time they are received, and expenses of the business are brought into account at the time they are paid. (3) Subsection (2) is subject to any adjustment required or authorised by law in calculating profits for income tax purposes. (4) For provision about the application of Chapter 4 (profits of property businesses: lease premiums etc) in relation to profits calculated on the cash basis, see section 276A. (5) For provision about the application of Chapter 5 (rules about deductions and receipts) in relation to profits calculated on the cash basis, see section 307A. (6) The following provisions apply only where profits are calculated on the cash basis— (a) section 272ZA (application of trading income rules: cash basis), and (b) Chapter 7A (cash basis: adjustments for capital allowances).
Propose a change