Income Tax (Trading and Other Income) Act 2005 section 237

Election for spreading if section 236 applies

Section 237 allows a taxpayer who faces an adjustment income charge following a change from a realisation basis to a mark-to-market basis (under section 236) to elect to spread that charge over six periods of account, rather than having it taxed in a single period.

• Where section 236 applies, the taxpayer may elect to spread the adjustment income equally over six periods of account, with one-sixth charged in each period starting from the first period under the new basis.
• The election must be made no later than the first anniversary of the normal self-assessment filing date for the tax year in which the change of basis occurs.
• Because section 236 postpones the charge until the asset is realised, the first period to which the new basis applies is not necessarily the period in which the charge would otherwise have arisen without the election.
• If the taxpayer permanently ceases the trade before the full adjustment income has been taxed, the entire remaining untaxed balance is charged to tax immediately before cessation.