Income Tax (Trading and Other Income) Act 2005 section 860

Adjustment income

Section 860 sets out how adjustment income arising from a change of accounting basis is dealt with when a trade or property business is carried on in partnership.

• A partial change in the membership of a partnership does not prevent the adjustment income rules from applying, provided at least one partner continues in the business both before and after the change.
• A change of partners does not count as a permanent cessation of the trade for adjustment income purposes, as long as continuity of at least one partner is maintained.
• The adjustment income for a partnership is calculated as though the firm were a single UK-resident individual, and each partner's share is then allocated according to the profit-sharing arrangements for the 12 months ending immediately before the new basis was adopted.
• Any election to accelerate or spread adjustment income charges must be made jointly by all persons who were members of the firm during that 12-month period.