Corporation Tax Act 2009 section 182

Calculation of the adjustment

Section 182 sets out the method for calculating the adjustment to profits when a company changes its basis of accounting for tax purposes, using a two-step process that compares the old and new bases to identify understated or overstated profits.

• Step 1 adds together all amounts by which profits were understated (or losses overstated) under the old basis, including unrecognised receipts, expenses brought forward too early, unmatched opening stock or work in progress deductions, and unadjusted depreciation
• Step 2 deducts all amounts by which profits were overstated (or losses understated) under the old basis, including receipts recognised too early, expenses that were omitted but would have been recognised under the new basis, and unmatched closing stock or work in progress credits
• The calculation covers differences in the treatment of trading stock and work in progress, comparing opening and closing figures either where they are unmatched or where a different valuation basis would have produced a higher or lower figure
• Any amount deducted at Step 2 cannot be deducted again when calculating profits of any subsequent accounting period, preventing a double deduction