Post-cessation receipts and expenses

Tax relief may be available for post-cessation expenses of a trade. In order to be an allowable post-cessation expense, the trade must have ceased, and the expense must have been deductible in calculating the trading profits.

This means that the expense still has to meet the wholly and exclusively test and be revenue, not capital, expenditure. The expenditure can be apportioned if necessary. The way in which post-cessation expenses can be relieved depends on the person incurring the expenditure and the type of expenditure incurred.

The following are examples of expenses that would likely be categorised as post-cessation expenses:

  • remedying defective work done, goods supplied, or services rendered while the business was continuing or as damages in respect of such defective work, goods or services whether awarded by a Court or agreed during negotiations on a claim;
  • paying legal or other professional expenses incurred in connection with the costs above;
  • insuring against liabilities arising out of any such claim or against the incurring of such expenses; and
  • collecting, or seeking to collect, debts which were considered in computing the profits of the trade before discontinuance.

An expense specifically relating to the cessation itself is not an allowable expense.



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According to HMRC’s published guidance there are special rules for the taxation of post-cessation receipts and expenses. These provisions apply to professions, vocations and trades.


Tax relief may be available for post-cessation expenses of a trade, although such expenses still have to satisfy the wholly and exclusively test and be revenue in nature to qualify for relief. In order to be an allowable post-cessation expense, the trade must have ceased, and the expense would, in the normal course of events, have been deductible in calculating trading profits. Post-cessation expenses must be set against post-cessation receipts arising in the same period, before any other method of relief can be considered.


There are a number of different ways in which post-cessation expenses can be relieved. Relief will depend on the person incurring the expenditure and the type of expenditure incurred.


An expense specifically relating to the cessation itself is not an allowable expense.



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