Part 2Trading income
Chapter 3Trade profits: basic rules
24Professions and vocations
Apart from section 30 (animals kept for trade purposes), the provisions of this Chapter apply to professions and vocations as they apply to trades.
25Generally accepted accounting practice
1
The profits of a trade must be calculated in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for income tax purposes.
2
This does not—
a
require a person to comply with the requirements of F3the Companies Act 2006 or subordinate legislation made under that Act except as to the basis of calculation, or
b
impose any requirements as to audit or disclosure.
3
This section is subject to section 160 (barristers and advocates in early years of practice).
4
This section does not affect provisions of the Income Tax Acts relating to the calculation of the profits of Lloyd's underwriters.
26Losses calculated on same basis as profits
1
The same rules apply for income tax purposes in calculating losses of a trade as apply in calculating profits.
2
This is subject to any express provision to the contrary.
27Receipts and expenses
1
In the Income Tax Acts, in the context of the calculation of the profits of a trade, references to receipts and expenses are to any items brought into account as credits or debits in calculating the profits.
2
There is no implication that an amount has been actually received or paid.
3
This section is subject to any express provision to the contrary.
28Items treated under CAA 2001 as receipts and expenses
The rules for calculating the profits of a trade need to be read with—
a
the provisions of CAA 2001 which treat charges as receipts of a trade, and
b
the provisions of CAA 2001 which treat allowances as expenses of a trade.
29Interest
For the purpose of calculating the profits of a trade, interest is an item of a revenue nature, whatever the nature of the loan.
30Animals kept for trade purposes
1
Animals or other living creatures kept for the purposes of a trade are treated as trading stock if they are not kept wholly or mainly—
a
for the work they do in connection with the carrying on of the trade,
b
for public exhibition, or
c
for racing or other competitive purposes.
2
But they are not treated as trading stock if they are part of a herd in relation to which a herd basis election has effect (see Chapter 8).
3
This section applies to shares in animals or other living creatures as it applies to the creatures themselves.
4
This section does not apply to professions or vocations.
31Relationship between rules prohibiting and allowing deductions
1
Any relevant permissive rule in this Part—
a
has priority over any relevant prohibitive rule in this Part, but
2
In this section “any relevant permissive rule in this Part” means any provision of—
a
Chapter 5 (apart from sections 60 to 67),
b
Chapter 11, or
c
Chapter 13,
which allows a deduction in calculating the profits of a trade.
3
In this section “any relevant prohibitive rule in this Part”, in relation to any deduction, means any provision of this Part (apart from sections F236, 38, 48 and 55) which might otherwise be read as—
a
prohibiting the deduction, or
b
restricting the amount of the deduction.