What are post-cessation expenses?
Post-cessation expenses are expenses incurred wholly and exclusively by the trader in connection with a trade, profession or vocation which has ceased. For more on the meaning of wholly and exclusively, see the Wholly and exclusively guidance note.
Can you carry back post-cessation expenses?
Post-cessation receipts incurred in the first six years after cessation can be carried back and treated as if they arose on cessation. Instead there is a stand alone charge for the extra tax due on the post-cessation receipts. The tax due is calculated using the tax rates and allowances for the earlier period.
How do I claim post-cessation expenses?
To make a successful claim for an allowable post-cessation expense:
- the trade must have ceased, and.
- the expense would have been deductible in calculating the trading profits ie they still meet the wholly and exclusively test and be revenue in nature in order to qualify for relief.
What is post-cessation trade relief?
A person who incurs certain costs or bad debts directly related to a trade, profession or vocation that has ceased may claim relief against their other income and capital gains. This is known as “post-cessation trade relief”.
What is post-cessation?
Post-cessation receipts, as found at CTA2009 s190, are receipts that would have been accounted for when calculating the profits of the trade had it continued. They will have been received after the trade permanently ceased and will have arisen due to the previous carrying on of the trade.
What does post-cessation mean?
The concept of ‘post-cessation receipt’ is initially defined as a sum which is received after a person permanently ceases to carry on a trade but which arises from the carrying on of the trade before the cessation (ITTOIA 2005, s. 246).
What is a post-cessation receipt?
Post-cessation receipts are usually something that would have been taken into account in arriving at the profits of the trade had it not ceased. arise from the carrying on of the trade before the cessation, and. are not otherwise subject to tax (see BIM90010).
What is cessation tax?
It is a provision intended to ensure that the assessee does not get away with a double benefit once by way of deduction in an earlier assessment year and again by not being taxed on the benefit received by him in a later year with reference to the liability earlier allowed as a deduction.”
What is group relief?
Group relief is a mechanism that allows members of a corporation tax loss relief group (for which, see below) to share the benefit of certain corporation tax losses.
What is cessation rule?
“Where a company permanently ceases to carry on a trade or business (or in the case of a company other than a Nigerian company, permanently ceases to carry on a trade or business in Nigeria) in an accounting period, its assessable profits therefrom shall be the amount of the profits from the beginning of the accounting …
What is the year of cessation?
Year of cessation The profits to be charged to income tax for the year of assessment in which a trade or profession is permanently discontinued are the actual profits of the period from 1 January in that year of assessment to the date of cessation.
What is group deduction allowance?
The group deductions allowance is the maximum amount of deductions allowance that the nominated company can allocate on the statement it submits. This is calculated with reference to: The length of the nominated company’s accounting period, and.
Can a post cessation expense be deductible?
In the same way that post-cessation receipts are taxable income of the person who receives them, relief may be available for post-cessation expenses. In order to be an allowable post-cessation expense: the trade must have ceased, and. the expense would have been deductible in calculating the trading profits.
When do you get post cessation tax relief?
Relief is available for post-cessation expenses against total income and/or chargeable gains if: a ‘qualifying event’ occurs in relation to the debt owed to the person. The above ‘qualifying payment’ or ‘qualifying event’ must happen within seven years of the date of the cessation. A similar relief is available for post-cessation property expenses.
When does post cessation expense apply to a vehicle?
If the post-cessation expense relates to a vehicle and immediately before the person permanently ceases to carry on the trade S94D ITTOIA 2005 (see BIM75005) applies in relation to that vehicle, it is assumed that that section still applies in relation to the vehicle. Relief is available in a number of different ways depending on the circumstances.
Why is post cessation trade relief not available?
There is prohibition on double counting of the claim, which means post-cessation trade relief is not available for an amount for which relief is given, or is available, under any other provision of the Income Tax Acts. Anti-avoidance rule denies relief for any payment or event that is made in connection with a ‘relevant tax avoidance arrangement’.