Where the property business of a sole trader or partnership has ceased, a post-cessation relief allowing offset against current income may be available where, within seven years of the business ceasing, the taxpayer is required to make a ‘qualifying’ payment or an ‘event’ has occurred in connection with the ceased business.
• ‘Qualifying’ payment is for the remedying of defective work and legal expenses in connection with such defects.
• ‘Qualifying’ event is the confirmation of unpaid debts taken into account in calculating the profits or losses of the business.
The maximum must be offset against income first and then the balance may be relieved against any capital gains accruing in the same year.
Example:
Dawn sold the last property in her portfolio on 25 July 2007. In January 2014 she loses a court case for defective services and is obliged to make a compensation payment of £10,000. Her P60 for 2013/2014 shows taxable income of £30,000.
If she makes a claim by 31 January 2016 she can offset the £10,000 against her 2013/2014 income and obtain a tax refund.
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