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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 a ‘qualifying event’ has occurred in connection with the ceased business.

• ‘Qualifying payments’ include the remedying of defective work and legal expenses in connection with such defects, or expenses incurred in collecting outstanding business debts.

• ‘Qualifying events’ arise when debts taken into account in calculating the profits or losses of the business subsequently prove to be bad, or are released, after cessation.

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 2008. In January 2015 she loses a court case for defective services and is obliged to make a compensation payment of £10,000. Her P60 for 2014/15 shows taxable income of £30,000.

If she makes a claim by 31 January 2017 she can offset the £10,000 against her 2014/15 income and obtain a tax refund.