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HMRC internal manual

Business Income Manual

Trade profits: receipts not chargeable - source doctrine

Receipts, to be chargeable to Income Tax or to Corporation Tax on income, must arise from a source. To put the point another way, they must fall within the words of the charging provisions. If, for example, a taxpayer is a trader that does not mean that any non-capital receipt he or she gets is chargeable as trading income. It must also be a receipt forming part of the profits of the trade, which is the taxable ‘source’.

Assume, for example, that a greengrocer witnesses a car breakdown outside the business premises. The greengrocer takes the passengers to their destination, repairs the car and delivers it to its owner. Later he or she receives an unsought payment from the motorist in appreciation of the assistance provided. That amount is not from the greengrocer’s trade. It is not chargeable as part of the receipts of that trade. The payment, because it is unsolicited and made in recognition of the recipient’s personal qualities, is unlikely to be from any source and is almost certainly outside income taxation altogether.

Casual or occasional payments may, in some circumstances, be liable as miscellaneous income. There is guidance at BIM100110 onwards.