BIM15050 | Trade profits: statute - main charging provisions

SS5-7 Income (Trading and Other Income) Act 2005 (ITTOIA 2005); S35 Corporation Tax Act 2009 (CTA 2009)

For Income Tax the general charging provisions are in SS5-7 ITTOIA 2005.

S5 ITTOIA 2005 establishes that Income Tax is charged on the profits of a trade, profession or vocation.

S6 ITTOIA 2005 sets out the territorial scope of the charge to tax on trade profits. Details of the section are at BIM15010.

S7(1) ITTOIA 2005 provides that tax is charged ‘on the full amount of the profits for the tax year’. See BIM15040 for further guidance on the meaning of this expression.

Prior to being omitted by FA2022 for the the 2024-25 and subsequent tax years, S7(2) ITTOIA 05 adds that ‘the profits of a tax year are the profits of the basis period for the tax year’. For the rules identifying the basis period for a tax year up to and including the 2022-23 tax year see BIM81010 onwards.

For the 2024-25 tax year onwards basis period rules will not apply, and an individual will instead be taxed on the profits arising in the tax year. There are transitional rules for 2023-24. Please see BIM81230 to BIM81360 for guidance on the transitional year in 2023-24 and BIM81201 for 2024-25 onward.

For Corporation Tax the general charging provisions is S35 CTA 2009 which establishes that Corporation Tax on income applies to the profits of a trade. For the territorial scope of the charge see BIM15010.