Income Tax (Trading and Other Income) Act 2005 section 334

Treatment of adjustment expense

Section 334 sets out the rules for when and how an adjustment expense (a negative adjustment arising from a change of accounting basis) is treated for tax purposes.

• An adjustment expense is treated as a business expense arising on the last day of the first period of account under the new basis.
• Where the change of basis results from a tax adjustment affecting depreciation calculations, different timing rules apply.
• In depreciation-related cases, the adjustment expense is only recognised when the relevant asset is sold or written off.
• The section ensures that negative adjustments are relieved at the appropriate time depending on the nature of the change.