C1Part 3Trading income
Chapter 3Trade profits: basic rules
46Generally 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 corporation tax purposes.
2
This does not—
a
require a company to comply with the requirements of the Companies Act 2006 (c. 46) 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 does not affect any provisions of the Corporation Tax Acts—
a
relating to the calculation of the profits of—
i
Lloyd's underwriters, or
ii
the life assurance business of insurance companies, or
b
otherwise laying down special rules for the calculation of the profits of a particular description of business.
47Losses calculated on same basis as profits
1
The same rules apply for corporation tax purposes in calculating losses of a trade as apply in calculating profits.
2
This is subject to any express provision to the contrary.
48Receipts and expenses
1
In the Corporation 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
It follows that references in that context to receipts or expenses do not imply that an amount has actually been received or paid.
3
This section is subject to any express provision to the contrary.
49Items treated 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 allowances as expenses of a trade,
b
the provisions of CAA 2001 which treat charges as receipts of a trade,
c
section 297 (credits and debits in respect of a loan relationship to which a company is a party for the purposes of a trade it carries on treated as receipts and expenses of the trade),
d
section 573 (credits and debits in respect of a derivative contract to which a company is a party for the purposes of a trade it carries on treated as receipts and expenses of the trade),
e
section 747 (credits and debits in respect of an intangible fixed asset held by a company for the purposes of a trade it carries on treated as receipts and expenses of the trade), and
f
section 749 (credits and debits in respect of an intangible fixed asset held by a company for the purposes of a section 39(4) concern which it carries on treated as receipts and expenses of the concern).
50Animals 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.
51Relationship between rules prohibiting and allowing deductions
1
Any relevant permissive rule in this Part—
a
has priority over any relevant prohibitive rule, but
b
is subject to—
i
section 56 (car F1... hire),
ii
section 1288 (unpaid remuneration),
iii
section 1290 (employee benefit contributions),
iv
section 1304 (crime-related payments).
2
In this section “any relevant permissive rule in this Part” means any provision of—
a
Chapter 5 (trade profits: rules allowing deductions), apart from sections 62 to 67,
b
Chapter 7 (trade profits: gifts to charities etc),
c
Chapter 9 (trade profits: other specific trades), or
d
Chapter 12 (deductions from profits: unremittable amounts),
which allows a deduction in calculating the profits of a trade.
3
In this section “any relevant prohibitive rule”, in relation to any deduction, means any provision of this Part or Chapter 1 of Part 20 (apart from those mentioned in subsection (1)(b)) which might otherwise be read as—
a
prohibiting or deferring the deduction, or
b
restricting the amount of the deduction.
52Apportionment etc of profits and losses to accounting period
1
This section applies if a period of account of a trade does not coincide with an accounting period.
2
Any of the following steps may be taken if they are necessary in order to arrive at the profits or losses of the accounting period—
a
apportioning the profits or losses of a period of account to the parts of that period falling in different accounting periods, and
b
adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts).
3
The steps must be taken by reference to the number of days in the periods concerned.
Pt. 3 modified (1.1.2010) by Northern Rock plc (Tax Consequences) Regulations 2009 (S.I. 2009/3227), regs. 1, 4(1)