Income Tax (Trading and Other Income) Act 2005 section 56-59

Adjustment on change of basis

Sections 56 to 59 set out the transitional rules governing how adjustments are handled when a trader changes their accounting basis, including when the new rules take effect, temporary amendments to the treatment of adjustment income, the continuation of existing elections by barristers or advocates, and an age-related exemption for very early changes of basis.

• The rules in Chapter 17 of Part 2 on changes of accounting basis apply where the change takes effect for a period of account ending on or after 6 April 2005, with the change taking effect for the first period in which the new basis is adopted.
• Before 6 April 2006, temporary amendments applied to section 232 so that adjustment income was treated as relevant earnings for pension purposes under the older ICTA provisions, rather than as relevant UK earnings under the newer regime.
• Where a barrister or advocate had elected under Finance Act 2002 to accelerate their adjustment charge, and that election was in force immediately before 6 April 2005, the election continues to apply for 2005-06 and subsequent tax years.
• The old rule in section 104(4) of ICTA, which despite its repeal still applied to changes of accounting basis before 6 April 1999, does not apply if the person liable to tax as a result of the change was born before 6 April 1917.