Annex 1: Minor Changes in the Law Change 42: Trading and property income: post-cessation receipts: reinstatement of section 108 of ICTA: sections 198 to 200 and 286
Section 108 of ICTA allowed a taxpayer to elect to have a post-cessation receipt carried back to the year in which the trade ceased. For income tax it is rewritten as section 257 of ITTOIA.
When ITTOIA was enacted it was thought that section 108 of ICTA applied only for income tax. So the section was repealed.
Until 1996 an election to carry a post-cessation receipt back to the year of cessation resulted in an assessment for the year of cessation. So section 108 of ICTA provided that an assessment for that year could be made even if it was otherwise out of time for assessment. That treatment was inconsistent with (income tax) Self Assessment. So the relief is given in terms of tax (see paragraph 5 of Schedule 1B to TMA). The power to make late assessments was removed by FA 1996.
When Self Assessment for corporation tax was introduced Schedule 1B to TMA ceased to apply for corporation tax (see section 117(1)(a) of FA 1998). Paragraph 58 of Schedule 18 to FA 1998 deals in general terms with claims (such as one under section 108 of ICTA) which affect more than one accounting period. But there is no rule corresponding to the income tax rule in paragraph 5 of Schedule 1B to TMA.
Section 198 gives a company the right to elect to carry back a post-cessation receipt to the accounting period in which it ceased to carry on the trade. Sections 199 and 200 set out the form of the relief, which is modelled on the income tax relief in paragraph 5 of Schedule 1B to TMA.
Section 286 applies the relief to UK property businesses.
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.