Income Tax (Trading and Other Income) Act 2005 section 239B

Election to accelerate charge under section 239A

Section 239B allows a person who is spreading adjustment income over six years (under section 239A, on leaving the cash basis) to elect to bring more of that income into charge in an earlier year, thereby accelerating the tax liability.

• A person liable to tax on adjustment income in a tax year may elect to have an additional amount treated as arising in that year, speeding up the recognition of income that would otherwise be spread over the remaining years.
• The election must be made no later than the first anniversary of the normal self-assessment filing date for the tax year in question, and must specify the additional amount to be charged — which can be any part of the adjustment income not yet taxed.
• Once an election is made, the adjustment income used for calculating the spreading charge in subsequent years is reduced by a formula: A × 6 ÷ T, where A is the additional amount elected and T is the number of tax years still remaining in the original six-year spreading period.
• The effect of the formula is to translate the extra amount charged in the election year into an appropriate reduction of the total adjustment income pool, so that future annual instalments are recalculated on a lower base.