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Income Tax (Trading and Other Income) Act 2005

Section 232: Treatment of adjustment income

948.This section sets out two special rules for the treatment of adjustment income. It is based on paragraph 4(2) of Schedule 22 to FA 2002.

949.Subsection (1) establishes when the adjustment income arises, so that it is charged to tax for the appropriate year under section 229.

950.Subsection (3) treats the income as trade profits for the purpose of loss relief. So, for example, any losses of the same trade brought forward can be set against the income.

951.Subsection (4) preserves the treatment of adjustment income as earned income.

952.It also makes clear that adjustment income is relevant UK earnings for the purpose of making pension contributions.

953.FA 2004 made significant changes to the taxation of pension schemes. The changes take effect from 6 April 2006. This Act deals with this by including the new rules in section 232. The commencement issue is then dealt with as a transitional measure in paragraph 57 of Schedule 2 of this Act. The old rules apply until 5 April 2006.

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