Income Tax (Trading and Other Income) Act 2005 section 235

Cases where adjustment not required until assets realised or written off

Section 235 provides a special timing rule for adjustment income or expenses arising from a change of basis that affects trading stock, work in progress, or depreciation, deferring the adjustment until the relevant asset is realised or written off.

• Applies when a change of accounting basis results from a tax adjustment affecting closing or opening trading stock, work in progress, or depreciation
• Overrides the general rule that adjustments are recognised at the end of the first period on the new basis
• Any resulting adjustment income or adjustment expense is only recognised when the specific asset to which it relates is realised or written off
• Covers three categories: closing stock or work in progress before the change, opening stock or work in progress after the change, and amounts for depreciation