Income Tax (Trading and Other Income) Act 2005 section 26

Losses calculated on same basis as profits

Section 26 establishes that trading losses must be calculated using the same rules as trading profits for income tax purposes.

• Trading losses are calculated using exactly the same rules as trading profits for income tax purposes.
• This ensures consistency between how profits and losses are measured and reported.
• All the rules that apply to profit calculations — such as the accruals basis, allowable deductions, and timing of recognition — equally apply when working out a loss.
• This general rule can be overridden where there is a specific statutory provision that says otherwise.