Income Tax (Trading and Other Income) Act 2005 section 96

Capital receipts

Section 96 establishes the general rule that capital receipts must be excluded when calculating trading profits for income tax purposes, while recognising that certain statutory exceptions exist.

• Receipts of a capital nature must not be included when calculating the profits of a trade for income tax purposes.
• This reflects the long-established legal principle that income tax is a tax on income, not on capital.
• Whether a receipt is capital or revenue in nature depends on the specific trade — for example, the sale of a factory is normally a capital receipt, but it would be revenue if the trader's business is buying and selling factories.
• The general exclusion of capital receipts is overridden where a specific statutory provision requires a capital sum to be brought into account as a trading receipt.