Revenue Note for Guidance

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Revenue Note for Guidance

67 Special basis on discontinuance of trade or profession


In the case of the cessation of a trade or profession, the final year’s assessment is based on the actual profits arising from 1 January to the date of cessation. An amended assessment may be made for the penultimate year of assessment if the actual profits of that year (that is, profits in a calendar year) exceed the profits assessed for that year under the normal rules set out in section 65.


Year of cessation

(1)(a)(i) The profits to be charged to income tax for the year of assessment in which a trade or profession is permanently discontinued are those of the period from 1 January in the year of assessment and ending on the date of cessation. Any unutilised losses carried forward are to be set off or deducted from such profits. Where a person has been charged otherwise than in accordance with this procedure, any tax overpaid is to be repaid or an amended assessment is to be made.

Example 1

Business ceases on 31 July 2003. Taxpayer’s profits for the 10 month accounting period ended 31 July 2003 are €22,000.

Final year of assessment: 2003

Basis period for 2003 is 1/1/2003 to 31/7/2003

Assessable profit is €22,000 × 7/10 = €15,400

Penultimate year

(1)(a)(ii) The assessment for the penultimate year of assessment is initially based on the rules of section 65(2), e.g. on the profits arising in the twelve month period of account ending in that year of assessment where the rules of section 65(2)(a) have applied. However, if the actual profits of the penultimate year of assessment (i.e. the profits of the period from 1 January to 31 December in that year) exceed the profits on which a person has been assessed for that year, an amended assessment is made to charge the excess.

Example 2

Business permanently ceases on 31 May 2004. Accounts have been made up as follows:

Year ended 30/9/2002

Profits €20,000

Year ended 30/9/2003

Profits €24,000

8 months ended 31/5/2004

Profits €32,000

Year of cessation assessment

2004 (basis period 1/1/2004 to 31/5/2004) = €32,000 × 5/8

= €20,000

Penultimate year assessment

2003 original assessment (basis period y/e 30/9/2003)

= €24,000

Actual profits of 2003:

Profits 1/1/2003 to 30/9/2003 = €24,000 × 9/12

= €18,000


Profits 1/10/2003 to 31/12/2003 = €32,000 × 3/8

= €12,000


= €30,000

As the originally assessed profits for 2003 of €24,000 are less than actual profits of €30,000, assessment must be revised to actual profits of €30,000.

What are the changes arising in the case of cessation of a trade or profession as a result of the introduction of the calendar year of assessment?

The basic rules remain unchanged but some technical amendments were necessary to reflect the change to a calendar year of assessment, including an amendment to ensure that, where a cessation takes place in the year of assessment 2002, the review of the penultimate year of assessment will be by reference to the actual profits of the short “year” of assessment 2001 (i.e. the profits of the period from 6 April 2001 to 31 December 2001).

Example 3

A trade is permanently discontinued on 31 May 2002. Accounts are made up as follows:

Profits 12 months ended 30/9/2000


Profits 12 months ended 30/9/2001


Profits 8 months ended 31/5/2002


Year of cessation 2002:

Basis period = profits 1/1/2002 – 31/5/2002 = €72,000 × 5/8


Penultimate year 2001:

Original assessment 2001 (section 65(2)(a) ***[Special Rule 1], as modified by section 65(3A)):

Basis period y/e 30/9/2001 Profits €80,000 × 74%


Actual profits of year 2001

Profits 6/4/2001 – 30/9/2001 €80,000 × 6/12


Profits 1/10/2001 – 31/12/2001 €72,000 × 3/8




As the profits of the short “year” of assessment year 2001 exceed the original assessment for 2001 the assessment will be increased to €67,000.

Deceased persons

(1)(b) In the case of a deceased person, income tax for any year of assessment for which the person has not already been assessed is to be charged and assessed on the person’s executors or administrators. Any such tax is a debt due out of the deceased person’s estate.

Cessation of trade on death

(2) A trade or profession being carried on by an individual is treated as having permanently ceased on the date of that person’s death. This applies despite the fact that the trade or business may be continued to be carried on by another person.

Relevant Date: Finance Act 2021