Finance Act 1981

Recovery of relief on cessation of trade etc.

4 (1) Where during or at the end of a period of account a person carrying on a trade ceases to do so, or ceases to be within the charge to income tax under Case I of Schedule D in respect of the trade, then, subject to paragraph 20 below—

(a) he shall not be entitled to relief in respect of that period; and

(b) a charge by way of recovery of relief shall be made on him on an amount equal to the unrecovered past relief allowed to him for that trade.

(2) Sub-paragraph (1) above shall apply also where the scale of the activities of the trade for any period of account is negligible in comparison with their scale for any previous period of account beginning not more than six years before the first-mentioned period.

(3) Where a charge for a period of account falls to be made under sub-paragraph (1)(b) above in consequence of a person ceasing to be within the charge to income tax in respect of a trade, or would fall to be so made apart from this sub-paragraph—

(a) the unrecovered past relief allowed to him for that trade shall be treated as reduced by any relief to which he was entitled for that trade in respect of a previous period of account but to which effect cannot be given because of his ceasing to be within the charge to income tax in respect of the trade; and

(b) the charge shall be reduced accordingly or, if the amount of the relief is equal to or exceeds the unrecovered past relief, shall not be made.

(4) Where during or at the end of a period of account a person carrying on a trade ceases (by virtue of ceasing to be resident in the United Kingdom) to be within the charge to income tax under Case I of Schedule D in respect of a part of the trade, he shall be treated for the purposes of this Schedule as if that part were a separate trade carried on by him in that period; and all necessary apportionments between the two parts of the trade (including the apportionment of unrecovered past relief allowed for that trade) shall be made by reference to the respective values of the trading stock of each part immediately after that event.