Part 2

Trading income
Chapter 18

Post-cessation receipts

Deductions

Allowable deductions
254
1
In calculating the amount on which tax is charged under this Chapter, deductions are allowed in accordance with—
a
this section, and
b
section 255,
from the amount which would otherwise be chargeable to tax under this Chapter.
2
A deduction is allowed for a loss, expense or debit which, if the person carrying on the trade had not permanently ceased to do so—
a
would have been deducted in calculating the profits of the trade for income or corporation tax purposes, or
b
would have been deducted from or set off against the profits of the trade for income or corporation tax purposes,
but no deduction is allowed if the loss, expense or debit arises directly or indirectly from the cessation itself.
2A
If, immediately before the person permanently ceases to carry on the trade, the cash basis applies in relation to the trade, assume for the purposes of subsection (2) that the cash basis applies in relation to the trade.
2B
If—
a
the loss or expense is incurred, or the debit arises, in relation to a vehicle, and
b
immediately before the person permanently ceases to carry on the trade, section 94D (deduction allowable at fixed rate for expenditure on vehicles) applies in relation to the vehicle,
assume for the purposes of subsection (2) that that section applies in relation to the vehicle.
3
No deduction for an amount is allowed under this section if the amount has been allowed—
a
under any other provision of the Tax Acts, or
b
as a result of section 261D of TCGA 1992 (capital gains tax relief for post-cessation expenditure).
Words in s. 254(3)(b) substituted (6.4.2007 with effect as noted in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 505 (with transitional provisions and savings in Sch. 2)
S. 254(2B) inserted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by Finance Act 2013 (c. 29), Sch. 5 para. 4
Pt. 2 Ch. 18 applied (with modifications) (22.7.2020) by Finance Act 2020 (c. 14), Sch. 16 para. 2(3)(a)
S. 254(2A) substituted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 30, 47 (with Sch. 10 paras. 48-50)