How is a positive adjustment amount treated under Corporation Tax Act 2009 section 181?

Under section 181 of the Corporation Tax Act 2009, a positive adjustment amount calculated under section 182 is treated as a trading receipt. It is brought into account on the first day of the first period of account for which the new accounting basis is adopted, thereby increasing the company's taxable trading profits for that period.

How is a negative adjustment amount treated under CTA 2009 section 181?

A negative adjustment amount under section 181 is allowed as a deductible trading expense. It reduces the company's taxable trading profits and is treated as arising on the first day of the first period of account under the new accounting basis. The calculation of the adjustment amount itself is governed by section 182.

When does the adjustment under section 181 arise for corporation tax purposes?

For corporation tax purposes, the adjustment under section 181 is treated as arising on the first day of the first period of account for which the new accounting basis is adopted. This differs from the income tax equivalent, where the adjustment arises on the last day of the relevant period rather than the first day.

What exceptions apply to the general adjustment rules in CTA 2009 section 181?

Three exceptions apply: section 183 excludes adjustments for certain previously recognised expenses; section 184 defers adjustments until relevant assets are realised or written off; and section 185 contains special rules for companies changing from a realisation basis to a mark-to-market basis of accounting. These override the general treatment.

Corporation Tax Act 2009 section 181

Giving effect to positive and negative adjustments

Section 181 explains how the adjustment amount arising from a change of accounting basis is treated for corporation tax purposes, depending on whether it is positive or negative.

An adjustment amount must be calculated in accordance with section 182
A positive adjustment is treated as a trading receipt; a negative adjustment is treated as a trading expense
In both cases, the adjustment is treated as arising on the first day of the first period of account under the new basis
The rules are subject to exceptions for certain previously recognised expenses, deferred adjustments on asset realisation, and changes from a realisation basis to mark to market

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