Income Tax (Trading and Other Income) Act 2005 section 228

Adjustment income and adjustment expense

Section 228 explains how the adjustment amount calculated under section 231 is treated, depending on whether it is positive or negative.

• An adjustment amount must be calculated in accordance with section 231 whenever there is a change of accounting basis for a trade.
• A positive adjustment is treated as taxable income (called "adjustment income") and charged to income tax as trading income.
• A negative adjustment gives rise to an allowable deduction (called an "adjustment expense") in calculating the profits of the trade.
• Section 234 overrides this section to prevent adjustments for certain expenses that have already been brought into account.