Related Commentary  Related HMRC Manuals

231  The amount of the adjustment is calculated as follows.

Step 1

Add together any amounts representing the extent to which, comparing the two bases, profits were understated (or losses overstated) on the old basis.

The amounts are–

Amounts
1 Receipts which on the new basis would have been brought into account in calculating the profits of a period of account before the change, so far as they were not so brought into account.
2 Expenses which on the new basis fall to be brought into account in calculating the profits of a period of account after the change, so far as they were brought into account in calculating the profits of a period of account before the change.
3 Deductions in respect of opening trading stock or opening work in progress in the first period of account on the new basis, so far as they–
  (a) are not matched by credits in respect of closing trading stock or closing work in
progress in the last period of account before the change, or
  (b) are calculated on a different basis that if used to calculate those credits would have
given a higher figure.
4 Amounts recognised for accounting purposes in respect of depreciation in the last period of account before the change, so far as they were not the subject of an adjustment for income tax purposes, where such an adjustment would be required on the new basis.

Step 2

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