Commentary

B2.301 What are the general rules governing the deductibility of trading expenses?

Business tax
Business tax | Commentary

B2.301 What are the general rules governing the deductibility of trading expenses?

Business tax | Commentary

Division B2.3     Trading expenses—general principles of deductibility

For updates affecting this Division please see Part B0 Updates

Introduction

B2.301 What are the general rules governing the deductibility of trading expenses?

The profits of a trade must be calculated in accordance with generally accepted accounting practice (see B2.102), subject to any adjustment required or authorised by law in calculating profits for tax purposes1. If, however, there is specific statutory authority to prohibit the deduction of a particular expense for tax purposes, the deduction may not be made even though it would be correct to deduct it as a matter of accounting principle.

This rule was stated by the Lord President (Lord Clyde) in Lothian Chemical Co2:

'… it has been said times without number—it has been said repeatedly in this court—that in considering what is the true balance of profits and gains in the Income

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