Commentary

B2.114 Adjustments arising on a change of basis

Business tax
Business tax | Commentary

B2.114 Adjustments arising on a change of basis

Business tax | Commentary

Adjustment income

B2.114 Adjustments arising on a change of basis

The profits of a trade must usually be calculated in accordance with generally accepted accounting practice (GAAP, see B2.101–B2.102), subject to any adjustment required by specific legislation1.

Where there is a change from one accounting basis on which the profits of the trade are calculated to another, there is a risk that some receipts or expenses could fall out of account. Legislation has been in place for some time to take account of the adjustment income or expenses which could arise in such circumstances2. The provisions for income tax apply to professions or vocations in the same way that they apply to trades3. Both the income tax and corporation tax legislation apply where a person or company carrying on a trade changes, from one period of account to the next, the basis of computing the profits of the trade for tax

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial