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In general this is probably the easiest figure to calculate for your Corporation Tax Return, as in most cases it should equal the Turnover figure in your Statutory Accounts. It should consist of all income receivable by the company during the accounting period that was used to calculate Operating Profit in the Statutory accounts. This will exclude interest from loan relationships such as bank accounts and directors loans (unless it was derived from a trading activity), income from UK land and buildings, exchange rate gains/losses on monetary assets and liabilities denominated in foreign currencies, gains/losses on most derivative contracts, annuities, certain types of overseas income and sale proceeds from the disposal of company assets.

Sometimes a company’s activities will be so dissimilar that they may be regarded for tax purposes as different trades. Should that be the case, you will need to keep a separate analysis of trading income so that the amounts attributable to each individual trade can be accurately determined. This is relevant for corporation tax because losses on individual trades can only be offset against profits from other trades occurring in the same accounting period. If you make a loss on a particular trade and it cannot be fully offset against other profits in the same accounting period, then you can only offset it against profits arising in earlier or later accounting periods if they relate to the same trade. Most companies will keep an analysis of trading income in their Management Accounts so this information should be readily ascertainable.

For service companies, trading income must include an estimate of income earned but not yet invoiced to customers at the year end. This is required for accounting purposes anyway under the UITF 40 rules, but for the avoidance of doubt it is also taxable income. However, there are provisions to spread the additional tax that would arise as a result of adopting this accounting treatment over a period of up to 5 years, subject to certain limits. Therefore, you may need to include this adjustment in your tax computation.

Acumen Tax Solutions
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For information of users: Although every care has been taken in compiling this material, it only provides an overview and does not take the place of an individual consultation. We strongly advise all users to consult the detailed legislation or seek professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or this firm.

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