Corporation Tax Act 2009 section 194

Transfer of rights if transferee does not carry on trade

Section 194 deals with the tax treatment when a company that has permanently ceased trading transfers the right to receive post-cessation sums to a person who does not carry on the trade.

• When a company permanently ceases a trade and sells the right to receive outstanding sums from that trade to a non-trading transferee, the transferor is treated as receiving a post-cessation receipt
• If the transfer is at arm's length, the post-cessation receipt equals the actual consideration received; if it is not at arm's length, the receipt is the arm's length value of the rights transferred
• Any sums the transferee actually receives after the trade has ceased are not treated as post-cessation receipts, so there is no double charge to tax
• Different rules apply where the transferee carries on the trade (section 95) or where trading stock is transferred (section 195)