ABSTRACT
Section 18 of the TA 1988 assesses income tax on the ‘annual profits and gains’ arising from a trade, etc. The expression, ‘annual’ has not been statutorily defined but has been regarded as referring to trading profits. Such profits are ascertained by including only trading receipts as reduced by deductible trading expenditure in the profit and loss account. The Tax Acts do not prescribe rules specifying the appropriate methods of ascertaining the annual profits for tax purposes. Prima facie the courts accept the net profits shown in the profit and loss account provided that this is prepared in accordance with ordinary principles of commercial accounting. Such profits are then adjusted in accordance with tax principles: see
Odeon Associated Theatres v Jones (1970) on the significance of principles of commercial accounting.
