What does section 316 of the Corporation Tax Act 2009 do?

Section 316 requires a company changing its accounting basis to recognise any difference in the tax-adjusted carrying value of assets or liabilities between the end of the old period and the start of the new period. The difference is brought into account as a credit or debit in the later period for corporation tax purposes.

When does a credit or debit arise under section 316 CTA 2009?

A credit arises when the tax-adjusted carrying value at the start of the new period is higher than at the end of the old period. A debit arises when it is lower. The credit or debit is treated in the same way as amounts determined under generally accepted accounting practice for that period.

Does section 316 apply if the value change is already accounted for elsewhere?

No. Section 316 only applies to the extent that the credit or debit would not already be brought into account under another provision. It acts as a safety net to ensure no value changes are missed when a company transitions between accounting bases, but avoids double counting.

How is the section 316 adjustment treated for corporation tax purposes?

The adjustment is brought into account in the first period under the new accounting basis. It is treated in the same manner as any other profit or loss item determined under generally accepted accounting practice for that period, ensuring consistent tax treatment aligned with the new accounting policy.

Corporation Tax Act 2009 section 316

Change of basis of accounting involving change of value

Section 316 deals with how to account for differences in the value of assets or liabilities when a company changes its accounting basis between two periods.

When a company changes its accounting policy, the tax-adjusted carrying value of an asset or liability may differ between the end of the old period and the start of the new period.
Any such difference must be recognised as a credit or debit in the later period, treated in the same way as credits or debits determined under generally accepted accounting practice.
If the value at the start of the new period is higher than at the end of the old period, a credit arises; if lower, a debit arises.
This adjustment only applies where the credit or debit would not already be brought into account under other provisions.

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