Search Legislation

Finance Act 2006

What Version

 Help about what version

Advanced Features

 Help about advanced features

Changes over time for: SCHEDULE 15

 Help about opening options

Changes to legislation:

There are outstanding changes not yet made by the legislation.gov.uk editorial team to Finance Act 2006. Any changes that have already been made by the team appear in the content and are referenced with annotations. Help about Changes to Legislation

Close

Changes to Legislation

Revised legislation carried on this site may not be fully up to date. Changes and effects are recorded by our editorial team in lists which can be found in the ‘Changes to Legislation’ area. Where those effects have yet to be applied to the text of the legislation by the editorial team they are also listed alongside the legislation in the affected provisions. Use the ‘more’ link to open the changes and effects relevant to the provision you are viewing.

Changes and effects yet to be applied to :

 Help about changes and effects
Close

Changes and effects

This section lists the changes and effects yet to be applied to the specific provision you are viewing.

Changes and effects yet to be applied to the whole Act associated Parts and Chapters:

 Help about changes and effects
Close

Changes and effects

This section lists the changes and effects yet to be applied to the whole Act, associated Parts and Chapters where applicable. This includes any insertions of whole new Parts, Chapters or provisions yet to be inserted into this Act. These effects are included in this view as they may be (but won’t necessarily be) relevant to the specific provision that you are viewing.

Whole provisions yet to be inserted into this Act (including any effects on those provisions):

Commencement Orders yet to be applied to the Finance Act 2006

 Help about changes and effects
Close

Commencement Orders

This section lists the commencement orders yet to be applied to the whole Act. These effects are included in this view as they may be (but won’t necessarily be) relevant to the specific provision that you are viewing. Where applicable the commencement orders are listed under two headings, firstly those that bring some part of the Act you are viewing into force and secondly, those that bring into force legislation that affects some part of the legislation you are viewing. If you are viewing a prospective version or there is a prospective version available there may be commencement orders listed here that are relevant to the provision you are viewing.

Commencement Orders bringing legislation that affects this Act into force:

Section 102

SCHEDULE 15E+W+S+N.I.Accountancy change: spreading of adjustment

Part 1 E+W+S+N.I.Income tax

Application of this Part of this ScheduleE+W+S+N.I.

1(1)This Part of this Schedule applies where—E+W+S+N.I.

(a)there is a change of accounting approach from one period of account to the next in calculating the profits of a business for income tax purposes,

(b)the later period of account ends on or after 22nd June 2005 and the basis on which the profits for that period are calculated is in accordance with UK GAAP (including SSAP 9 and Application Note G as interpreted by UITF 40), and

(c)the earlier period of account ended before that date and the basis on which profits for that period were calculated was in accordance with UK GAAP (including SSAP 9 and Application Note G, but not as interpreted by UITF 40),

and has effect in relation to any adjustment income under Chapter 17 of Part 2 of ITTIOIA 2005 attributable to the change of basis from that mentioned in paragraph (c) to that mentioned in paragraph (b).

(2)In relation to a period for which accounts are drawn up in accordance with international accounting standards, the references in sub-paragraph (1) to requirements of UK GAAP shall be read as references to the corresponding requirements of international accounting standards.

(3)In sub-paragraph (1)—

  • SSAP 9” means Statement of Standard Accounting Practice No.9 on Long-term contracts, issued by the Accounting Standards Board;

  • Application Note G” means Application Note G to Financial Reporting Standard 5 issued by the Accounting Standards Board in November 2003;

  • UITF 40” means Abstract No.40 on Revenue recognition and service contracts, issued by the Urgent Issues Task Force of the Accounting Standards Board on 10th March 2005.

(4)Any reference in this Part of this Schedule to the date on which the change of accounting approach was adopted is to the first day of the first period of account for which it was adopted.

(5)To determine the amount of adjustment income attributable to the change of basis mentioned in the closing words of sub-paragraph (1), assume that there was no other change of accounting approach.

Spreading of adjustment incomeE+W+S+N.I.

2(1)The adjustment income shall be spread in accordance with the following rules.E+W+S+N.I.

(2)In each of the first three tax years beginning with that in which the whole amount of the adjustment income would otherwise be chargeable to tax, an amount equal to whichever is the less of—

(a)one-third of the original amount of the adjustment income, and

(b)one-sixth of the profits of the business for that tax year,

is treated as arising and charged to tax.

(3)In the fourth and fifth tax years, if the whole of the adjustment income has not been charged to tax in previous tax years, an amount equal to whichever is the least of—

(a)the amount remaining untaxed,

(b)one-third of the original amount of the adjustment income, and

(c)one-sixth of the profits of the business for that tax year,

is treated as arising and charged to tax.

(4)In the sixth tax year so much (if any) of the adjustment income as has not previously been charged to tax is treated as arising and is charged to tax.

(5)For the purposes of this paragraph “the profits of the business” means the profits of the business as calculated for income tax purposes leaving out of account—

(a)any adjustment expenses under Chapter 17 of Part 2 of ITTIOIA 2005, and

(b)any allowances or charges under CAA 2001.

(6)This paragraph has effect subject to—

(a)paragraph 3 (effect of cessation of business), and

(b)paragraph 4 (election to accelerate charge).

Effect of cessation of businessE+W+S+N.I.

3If before the whole of the adjustment income has been charged to tax the person permanently ceases to carry on the business in question, paragraph 2 continues to apply but with the omission of the alternative limit in sub-paragraph (2)(b) and (3)(c) referring to the profits of the business.E+W+S+N.I.

Election to accelerate chargeE+W+S+N.I.

4(1)A person who under paragraph 2 is liable to tax for a tax year [F1(Year 1)]F1 on an amount of adjustment income may elect for an additional amount to be treated as arising in that tax year.E+W+S+N.I.

(2)The election must be made on or before the first anniversary of the [F231st January of Year 2.F2]

(3)The election must specify the amount to be treated as income arising in the tax year (which may be any amount up to the whole of the adjustment income not previously charged to tax).

(4)If an election is made, paragraph 2 applies in relation to any subsequent tax year as if the original amount of adjustment income (as reduced by the previous application of this sub-paragraph) were reduced by the additional amount treated as arising in the tax year for which the election is made.

Annotations: Help about Annotation
Close

Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

F1Words in Sch. 15 para. 4(1) inserted (with effect as mentioned in s. 92 of the amending Act) by Finance Act 2007 (c. 11), s. 91(10)(a)

F2Words in Sch. 15 para. 4(2) substituted (with effect as mentioned in s. 92 of the amending Act) by Finance Act 2007 (c. 11), s. 91(10)(b)

Liability of personal representativesE+W+S+N.I.

5(1)This paragraph applies in the case of the death of a person who would otherwise have been liable to tax under this Part of this Schedule on adjustment income.E+W+S+N.I.

(2)The tax under this Part of this Schedule for which the person would otherwise have been liable—

(a)shall be assessed and charged on the personal representatives, and

(b)is a debt due from and payable out of the deceased's estate.

(3)The personal representatives may make any election under this Part of this Schedule that the deceased might have made.

Meaning of “business”E+W+S+N.I.

6In this Part of this Schedule “business” means—E+W+S+N.I.

(a)a trade, profession or vocation, or

(b)a UK property business or overseas property business.

Application of provisions to partnershipsE+W+S+N.I.

7(1)This paragraph applies where the business is carried on by the person in partnership.E+W+S+N.I.

(2)The amounts chargeable to tax under this Part of this Schedule for any tax year are calculated as if the partnership were an individual resident in the United Kingdom.

(3)The person's share of the amount charged to tax is determined—

(a)for the first tax year, according to the profit-sharing arrangements for the twelve months ending immediately before the date on which the change of accounting practice was adopted;

(b)for any subsequent tax year, according to the profit-sharing arrangements for the twelve months immediately following the twelve months used to determine the person's share for the previous year.

An election under paragraph 4 (election to accelerate charge) in relation to a tax year must be made jointly by all the persons who have been members of the partnership in the relevant twelve month period and are chargeable to income tax.

(4)If paragraph 3 applies (effect of cessation of business), each partner's share of any amount charged to tax on or after the cessation is determined as follows—

(a)if the cessation occurs on the date on which the change of accounting approach was adopted, according to the profit-sharing arrangements for the twelve months ending immediately before that date;

(b)if the cessation occurs after that date, but on or before the first anniversary of that date, according to the profit-sharing arrangements for the period between that date and the date of cessation;

(c)if the cessation occurs after the first anniversary of the date on which the change of accounting approach was adopted, according to the profit-sharing arrangements for the period between the immediately preceding anniversary of that date and the date of cessation.

An election under paragraph 4 after the cessation must be made by each former partner separately.

(5)For the purposes of this paragraph “profit-sharing arrangements” means the rights of the partners to share in the profits of the business for the period in question.

(6)In the case of a business carried on by a limited liability partnership the operation of this Part of this Schedule is not affected by the partnership's ceasing to be one carrying on a trade, profession or other business with a view to profit.

Cases where spreading already availableE+W+S+N.I.

8This Part of this Schedule does not apply to adjustment income to which section 238 of that Act applies (spreading on ending of special provision for barristers and advocates in early years of practice).E+W+S+N.I.

Part 2 E+W+S+N.I.Corporation tax

Application of this Part of this ScheduleE+W+S+N.I.

9(1)This Part of this Schedule applies where—E+W+S+N.I.

(a)there is a change of accounting approach from one period of account to the next in calculating the profits of a business for corporation tax purposes,

(b)the later period of account ends on or after 22nd June 2005 and the basis on which the profits for that period are calculated is in accordance with UK GAAP (including SSAP 9 and Application Note G as interpreted by UITF 40), and

(c)the earlier period of account ended before that date and the basis on which profits for that period were calculated was in accordance with UK GAAP (including SSAP 9 and Application Note G, but not as interpreted by UITF 40),

and has effect in relation to any positive adjustment under section 64 of and Schedule 22 to FA 2002 attributable to the change of basis from that mentioned in paragraph (c) to that mentioned in paragraph (b).

(2)In relation to a period for which accounts are drawn up in accordance with international accounting standards, the references in sub-paragraph (1) to requirements of UK GAAP shall be read as references to the corresponding requirements of international accounting standards.

(3)In this paragraph—

  • SSAP 9” means Statement of Standard Accounting Practice No.9 on Long-term contracts, issued by the Accounting Standards Board;

  • Application Note G” means Application Note G to Financial Reporting Standard 5 issued by the Accounting Standards Board in November 2003;

  • UITF 40” means Abstract No.40 on Revenue recognition and service contracts, issued by the Urgent Issues Task Force of the Accounting Standards Board on 10th March 2005.

(4)Any reference in this Part of this Schedule to the date on which the change of accounting approach was adopted is to the first day of the first period of account for which it was adopted.

(5)To determine the amount of positive adjustment attributable to the change of basis mentioned in the closing words of sub-paragraph (1), assume that there was no other change of accounting approach.

Spreading of adjustmentE+W+S+N.I.

10(1)The adjustment shall be spread in accordance with the following rules.E+W+S+N.I.

(2)In each of the first three accounting periods beginning with that in which the whole of the adjustment would otherwise be charged to tax, an amount equal to whichever is the less of—

(a)one-third of the amount of the original adjustment, and

(b)one-sixth of the profits of the business for that period,

is treated as arising and charged to tax.

(3)In the fourth and fifth accounting periods, if the whole of the adjustment has not been charged to tax in the previous periods, an amount equal to whichever is the least of—

(a)the amount remaining untaxed,

(b)one-third of the amount of the original adjustment, and

(c)one-sixth of the profits of the business for that period,

is treated as arising and charged to tax.

(4)In the sixth accounting period so much (if any) of the adjustment as has not previously been charged to tax is treated as arising and is charged to tax.

(5)For the purposes of this paragraph “the profits of the business” means the profits of the business as calculated for corporation tax purposes leaving out of account—

(a)any adjustment under Schedule 22 to FA 2002, and

(b)any allowances or charges under CAA 2001.

(6)This paragraph has effect subject to—

(a)paragraph 11 (accounting periods of less than twelve months),

(b)paragraph 12 (effect of other events bringing accounting period to an end), and

(c)paragraph 13 (election to accelerate charge).

Accounting periods of less than twelve monthsE+W+S+N.I.

11(1)This paragraph applies where by reason of—E+W+S+N.I.

(a)a change of accounting date,

(b)the company entering administration (see section 12(7ZA) of ICTA), or

(c)an insurance business transfer scheme (see section 12(7A) and (7B) of that Act),

an accounting period to which paragraph 10 applies is a period of less than twelve months (a “short period”).

(2)In relation to a short period the references in that paragraph to one-third of the amount of the original adjustment shall be read as references to the proportion of that amount that the period bears to twelve months.

(3)Where any of the accounting periods of the company falling within the period of six years following the change of accounting approach is a short period—

(a)the rule in paragraph 10(3) applies in relation to every accounting period after the third and before that in which the sixth anniversary of the change of accounting approach falls, and

(b)the rule in paragraph 10(4) applies in relation to the accounting period in which that anniversary falls.

Effect of other events bringing accounting period to an endE+W+S+N.I.

12(1)If before the whole of the adjustment has been charged to tax an accounting period of the company ends by reason of—E+W+S+N.I.

(a)the company ceasing to be within the charge to corporation tax,

(b)the commencement of winding-up proceedings in respect of the company (see section 12(7) of ICTA),

the rule in paragraph 10(4) applies in relation to that accounting period.

(2)If the company permanently ceases to carry on the business in question (without there being any event within sub-paragraph (1) above), paragraph 10 continues to apply but with the omission of the alternative limit in sub-paragraph (2)(b) and (3)(c) referring to the profits of the business.

Election to accelerate chargeE+W+S+N.I.

13(1)A company that under paragraph 10 is liable to tax for an accounting period on any amount may elect for an additional amount to be treated as arising in that period.E+W+S+N.I.

(2)The election must be made on or before the first anniversary of the filing date for the company's company tax return for the accounting period for which the election is made.

(3)The election must specify the amount to be treated as arising in the accounting period (which may be any amount up to the whole of the adjustment not previously charged to tax).

(4)If an election is made, paragraph 10 applies in relation to any subsequent accounting period as if the amount of the original adjustment (as reduced by any previous application of this sub-paragraph) were reduced by the additional amount treated as arising in the accounting period for which the election is made.

Meaning of “business” etcE+W+S+N.I.

14(1)In this Part of this Schedule “business” means—E+W+S+N.I.

(a)a trade or vocation, or

(b)a Schedule A business or overseas property business.

Application of provisions to partnershipsE+W+S+N.I.

15(1)This paragraph applies where the business is carried on by the company in partnership.E+W+S+N.I.

(2)The amounts chargeable to tax under this Part of this Schedule are calculated as if the partnership were a company resident in the United Kingdom.

(3)The company's share of any such amount is determined by reference to the profit-sharing arrangements for the previous accounting period.

An election under paragraph 13 (election to accelerate charge) must be made jointly by all the persons who have been members of the partnership in the previous accounting period and are chargeable to corporation tax.

(4)If paragraph 12(2) applies (effect of cessation of business), each partner's share of any amount charged to tax on or after the cessation is determined as follows—

(a)if the cessation occurs on the date on which the change of accounting approach was adopted, according to the profit-sharing arrangements for the twelve months ending immediately before that date;

(b)if the cessation occurs after that date, but on or before the first anniversary of that date, according to the profit-sharing arrangements for the period between that date and the date of cessation;

(c)if the cessation occurs after the first anniversary of the date on which the change of accounting approach was adopted, according to the profit-sharing arrangements for the period between the immediately preceding anniversary of that date and the date of cessation.

An election under paragraph 13 after the cessation must be made by each former partner separately.

(5)For the purposes of this paragraph “profit-sharing arrangements” means the rights of the partners to share in the profits of the business for the period in question.

(6)A change in the persons carrying on a business does not constitute the permanent cessation of the business for the purposes of this Part of this Schedule so long as a person carrying on the business immediately before the change continues to carry on the business immediately after the change.

(7)In the case of a business carried on by a limited liability partnership the operation of this Part of this Schedule is not affected by the partnership's ceasing to be one carrying on a trade, profession or other business with a view to profit.

(8)Nothing in this paragraph shall be read as affecting the operation of—

(a)paragraph 19 of Schedule 9 to FA 1996 (loan relationships), or

(b)paragraph 49 of Schedule 26 to FA 2002 (derivative contracts),

(under which certain debits and credits are not to be brought into account as if the partnership were a company).

Back to top

Options/Help

Print Options

You have chosen to open The Whole Act

The Whole Act you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

Would you like to continue?

You have chosen to open The Whole Act as a PDF

The Whole Act you have selected contains over 200 provisions and might take some time to download.

Would you like to continue?

You have chosen to open the Whole Act

The Whole Act you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

Would you like to continue?

You have chosen to open the Whole Act without Schedules

The Whole Act without Schedules you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

Would you like to continue?

You have chosen to open Schedules only

The Schedules you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

Would you like to continue?

Close

Legislation is available in different versions:

Latest Available (revised):The latest available updated version of the legislation incorporating changes made by subsequent legislation and applied by our editorial team. Changes we have not yet applied to the text, can be found in the ‘Changes to Legislation’ area.

Original (As Enacted or Made):The original version of the legislation as it stood when it was enacted or made. No changes have been applied to the text.

Close

See additional information alongside the content

Geographical Extent: Indicates the geographical area that this provision applies to. For further information see ‘Frequently Asked Questions’.

Show Timeline of Changes: See how this legislation has or could change over time. Turning this feature on will show extra navigation options to go to these specific points in time. Return to the latest available version by using the controls above in the What Version box.

Close

Opening Options

Different options to open legislation in order to view more content on screen at once

Close

More Resources

Access essential accompanying documents and information for this legislation item from this tab. Dependent on the legislation item being viewed this may include:

  • the original print PDF of the as enactedversion that was used for the print copy
  • lists of changes made by and/or affecting this legislation item
  • confers power and blanket amendment details
  • all formats of all associated documents
  • correction slips
  • links to related legislation and further information resources
Close

Timeline of Changes

This timeline shows the different points in time where a change occurred. The dates will coincide with the earliest date on which the change (e.g an insertion, a repeal or a substitution) that was applied came into force. The first date in the timeline will usually be the earliest date when the provision came into force. In some cases the first date is 01/02/1991 (or for Northern Ireland legislation 01/01/2006). This date is our basedate. No versions before this date are available. For further information see the Editorial Practice Guide and Glossary under Help.

Close

More Resources

Use this menu to access essential accompanying documents and information for this legislation item. Dependent on the legislation item being viewed this may include:

  • the original print PDF of the as enacted version that was used for the print copy
  • correction slips

Click 'View More' or select 'More Resources' tab for additional information including:

  • lists of changes made by and/or affecting this legislation item
  • confers power and blanket amendment details
  • all formats of all associated documents
  • links to related legislation and further information resources