Income Tax (Trading and Other Income) Act 2005 section 256

Treatment of post-cessation receipts

Section 256 deals with how post-cessation receipts from a permanently ceased trade are treated for the purposes of pension contribution relief, by classifying them as relevant UK earnings.

• This section applies where an individual has permanently ceased to carry on a trade and the trade income was classified as relevant UK earnings under section 189(2)(b) of the Finance Act 2004.
• Any post-cessation receipts arising from that trade are also treated as relevant UK earnings, preserving their character as earned income.
• This classification matters primarily for pension contribution purposes, as relevant UK earnings determine the amount an individual can contribute to a pension scheme with tax relief.
• The rules in this section took effect from 6 April 2006, in line with the major pension taxation reforms introduced by the Finance Act 2004, with transitional provisions applying for earlier periods.