Overview
32.This Part contains the rules relating to trading income. The Part charges:
the profits of a trade, profession or vocation (charged in the source legislation under Schedule D Cases I, II or V);
amounts treated as income on a change of accounting basis (charged in the source legislation under Schedule D Case VI); and
post-cessation receipts (charged in the source legislation under Schedule D Case VI).
33.The structure of the Part is to:
identify the income taxed as profits of a trade (Chapter 2);
calculate the profits of the trade (Chapters 3 to 7);
apply the rules for particular trades (Chapters 8 to 11);
apply other rules affecting the calculation of profits of the trade (Chapters 12 to 14);
identify basis periods (Chapter 15);
apply averaging (Chapter 16);
identify other components of trading income (Chapters 17 and 18); and
provide supplementary material (Chapter 19).
34.The rules in Chapters 3 to 14, dealing with profits of the trade, determine the profit of the period of account. Once the profit for tax purposes of the period of account has been calculated:
the basis period rules convert the profit of the period of account to the profit for the tax year; and
the averaging rules, if applicable, adjust the profits of tax years.
35.Two particular charges are located in Chapters 17 and 18.
36.References to “profits or gains” in the source legislation which relate only to income are rewritten in this Part omitting the reference to “gains”. This continues the tidying up of such references started in section 46(3) of and Schedule 7 to FA 1998.
