Income Tax (Trading and Other Income) Act 2005 section 329A

Application of Chapter where cash basis used

Section 329A establishes when the adjustment income rules in Chapter 7 apply to property businesses that switch between the cash basis and GAAP (Generally Accepted Accounting Practice) methods of calculating profits.

• Chapter 7 adjustment income rules apply when a property business changes its method of calculating profits from one tax year to the next
• The rules are triggered when a property business moves from the cash basis to GAAP, or from GAAP to the cash basis
• The change must occur between consecutive tax years — the method used in one year must differ from the method used in the following year
• The purpose is to ensure that income is neither missed nor taxed twice when transitioning between accounting methods