Commentary on Sections Overview Overview Section 95: Acquisition of trade: receipts from transferor’s trade
369.This section sets out what happens if a successor to a trade receives a sum that arose from the trade when it was carried on by the predecessor. It is based on section 106 of ICTA. The corresponding rule for income tax is in section 98 of ITTOIA.
370.If a sum arises from a trade that has ceased, the usual rule is that the sum is a post-cessation receipt (see Chapter 15 of this Part). But, if the right to receive the sum is transferred with the trade to a company which takes over the trade, this section applies instead.
371.Subsection (1) refers to a “person” ceasing to carry on a trade. That person may be one of the partners in a firm. If a firm ceases to carry on a trade, all its partners must also cease. So the section applies in either case.
372.Subsection (2) treats the sum as a receipt of the successor’s trade. It is not charged on the predecessor. The source legislation treats the sum as a receipt “in the period in which it is received”. The section makes it clear that the period in question is an accounting period.
373.Different rules apply if the right to receive sums is transferred to a person who does not take over the trade (see section 194 of this Act).