Trading income: overview
S3 Income (Trading and Other Income) Act 2005 (ITTOIA 2005); S34 Corporation Tax Act 2009 (CTA 2009)
The law relating to the taxation of trading income is contained in Pt 2 ITTOIA 2005 (SS3-259) for Income Tax and Pt 3 CTA 2009 (SS34-201) for Corporation Tax.
Pt 2 ITTOIA 2005 imposes charges to Income Tax on the following categories of income:
(i) the profits of a trade, profession or vocation;
(ii) adjustment income (which may arise on a change in accounting policy or tax adjustments in respect of a trade, profession or vocation - see BIM34000);
(iii) post-cessation receipts (i.e. receipts arising from the carrying on of a trade, profession or vocation received after the trade ceases and not already taxed - see BIM90000).
Pt 3 CTA 2009 imposes charges to Corporation Tax on:
(a) the profits of a trade;
(b) post-cessation receipts from a trade.
For Corporation Tax purposes, adjustment income is brought into account as a receipt in calculating the profits of the trade etc, rather than as a stand-alone tax charge as it is for Income Tax. See BIM34000 onwards.