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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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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.