The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
The basic rules determining the calculation of trade profits and losses for corporation tax purposes are found in CTA 2009. Statutory provisions determining the required adjustments to trading profits are brief, supplemented by a substantial body of case law.
The rules in CTA 2009 are derived from ICTA 1988, which also provided the basis of the rules now found in ITTOIA 2005 for individuals. Consequently, many of the general principles share a common basis in law. Where there is a common statutory basis, case law is equally applicable to both income tax and corporation tax. For example, the principles established in Herbert Smith v Honour are applicable to companies even though the case concerned an unincorporated partnership.
The most general rule applicable to calculating profits in relation to corporation tax is that in the absence of any amendment required for tax purposes, the trading profit or loss is calculated in accordance with generally accepted accounting procedures (GAAP).
This means that the taxable trading profit (TTP) is the starting point of the tax calculation. This is then subject to adjustments required by tax law.
GAAP is defined for this purpose by CTA 2010, s 1127. GAAP currently includes accounts prepared under:
HMRC guidance on the accounting principles relevant to the computation of trading profits can
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