Income received after a company stops trading: is it taxable?
Short version. Income can still be taxable after a company stops trading. A qualifying post-cessation receipt is reported in CT600 box 205. Non-trading bank interest belongs in box 170. Do not tax a receipt again merely because the cash arrived later.
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1. Understand the treatment
CTA 2009 section 188 imposes a charge on qualifying post-cessation receipts. The usual conditions are that the receipt follows permanent cessation, arises from the former trade and is not otherwise taxed. HMRC BIM90030 also lists specific categories and exclusions. Some listed rules apply only to Income Tax, not companies.
A refund of an expense previously deducted can be relevant. A debt paid after cessation may also qualify under its specific rules, but ordinary collection of a debtor already included in taxable trading profits is not a reason to charge the amount twice. Bank interest has its own loan-relationship treatment.
Prepare the cessation-period return and identify any later Corporation Tax period. Cessation ends an accounting period. A new one starts immediately afterwards if the company remains within the charge. The statutory accounts dates can differ from those tax dates.
2. Fictional worked example
In this fictional example a company receives a £1,000 refund relating to a deductible expense of its former trade. Assume it qualifies as a post-cessation receipt and has not otherwise been taxed. A £200 qualifying section 196 deduction leaves £800 in box 205. Separate bank interest of £500 belongs in box 170. Before other reliefs, the two income figures total £1,300.
3. Common mistakes
- Putting a post-cessation receipt in trading turnover.
- Putting bank interest in box 205 merely because trading has stopped.
- Including an already-taxed customer debt a second time.
- Assuming the accounts end date overrides the cessation boundary.
4. How to file
SimpleCompanyTax prepares supported micro-company returns from your figures. Follow the exact filing steps and review each return’s computation before approving the filing. For more background, read section 196 worked examples and later bank interest.
This is general guidance. Your company’s treatment depends on its circumstances. Decide the classification and claims yourself or with your accountant.