Income Tax (Trading and Other Income) Act 2005 section 227A

Application of Chapter where cash basis used

Section 227A sets out when the adjustment income rules in Chapter 17 apply where a trader switches into or out of the cash basis of accounting.

• Chapter 17 applies when a trade uses the cash basis in one tax year but not the next, or vice versa
• The adjustment rules are triggered by any change in accounting basis between the cash basis and traditional accruals accounting
• The Chapter does not apply to relevant foreign income that is taxed on the remittance basis under section 832
• The rules are subject to section 227C, which modifies the Chapter's application where section 227B (concerning the trading allowance) applies