Trading income is taxed for both income tax and corporation tax purposes. In order for a tax charge to arise under the trading income rules, there must be a trade. It is therefore necessary to understand what constitutes trading, and when a trade commenced or ceased.
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Capital allowances are the tax equivalent of depreciation, and the mechanism of providing tax relief for certain items of capital expenditure. However, with the exception of cars, capital allowances are not available where accounts are prepared under the cash basis; instead relief may be available as a deduction in computing profits under the cash basis capital expenditure rules.
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