Income Tax (Trading and Other Income) Act 2005 section 232

Treatment of adjustment income

Section 232 sets out special rules governing when adjustment income arises, how it is treated for loss relief purposes, and its status as relevant UK earnings for pension contribution purposes.

• Adjustment income is treated as arising on the last day of the first period of account under the new basis, and is charged to tax for the corresponding tax year
• Two exceptions may defer the timing: where the adjustment is not required until assets are realised or written off, or where there is a change from the realisation basis to mark to market
• Adjustment income counts as trade profits for the relevant tax year for loss relief purposes, meaning trade losses brought forward can be set against it
• Where an individual's trade income qualifies as relevant UK earnings, the adjustment income is also treated as relevant UK earnings, preserving its status as earned income eligible for pension contribution relief