Payment did not qualify for post-cessation trade relief

The taxpayer a chartered accountant was in a partnership with one other partner. A dispute with a client led to a legal claim against the taxpayer. The firm stopped practising in November 2007. In March 2011 the client began proceedings for damages against the taxpayer and he engaged lawyers to deal with the dispute. In February 2013 the taxpayer was found liable for damages of £550 000. In March 2012 the taxpayer sent an email to himself stating that £400 000 held in his bank account was now held in a bare trust for the benefit of the client as part of any settlement.

He claimed post-cessation trade relief (PCTR) (ITA 2007 s 96) for 2011-12 on legal fees and the £400 000 payment. HMRC refused so the taxpayer appealed.