Income Tax (Trading and Other Income) Act 2005 section 236

Change from realisation basis to mark to market

Section 236 deals with the tax adjustments that arise when a trader in financial assets changes from the realisation basis of accounting to a mark to market basis.

• When a business switches from recognising profits or losses only on disposal of an asset to valuing assets at fair value each period, a tax adjustment arises under section 231.
• Any adjustment income or adjustment expense relating to trading stock is deferred — it is not treated as arising until the period of account in which the asset is actually realised (i.e. sold or disposed of).
• If the deferred amount is adjustment income, the trader may instead elect under section 237 to spread that income over several periods.
• Trading stock for these purposes has the same meaning as in section 174.