Chapter 15: Adjustments on change of accounting policy
Overview
2221.This Chapter rewrites the rules in Part 13A of Schedule 29 to FA 2002. Part 13A gives rules dealing with a company’s change of accounting policy where it affects assets within the intangible fixed assets regime.
2222.Part 13A of Schedule 29 to FA 2002 applies, in particular, when a company changes between UK generally accepted accounting practice and International Accounting Standards. It ensures that any change in accounting value of the assets resulting from the change of accounting policy will be brought into account for tax purposes.
Section 871: Introduction to Chapter
2223.This section explains when the rules in this Chapter apply. It is based on paragraph 116A of Schedule 29 to FA 2002.
Section 872: Adjustments in respect of change
2224.This section provides for an adjustment when the value of an intangible fixed asset changes as a result of a change of accounting policy. It is based on paragraph 116B of Schedule 29 to FA 2002.
2225.This section provides for the change in value to translate into a corresponding credit or debit.
Section 873: Effect of application of section 872 in later period and subsequently
2226.This section sets out the effects of an adjustment under the previous section. It is based on paragraph 116B of Schedule 29 to FA 2002.
Section 874: Original asset not subject to fixed-rate writing down
2227.This section provides for an adjustment when a change of accounting policy results in one intangible fixed asset being treated as two or more assets and gives the calculation rules. It is based on paragraph 116C of Schedule 29 to FA 2002.
Section 875: Effect of application of section 874 in later period and subsequently
2228.This section sets out the effects of an adjustment under the previous section. It is based on paragraph 116C of Schedule 29 to FA 2002.
Section 876: Original asset subject to fixed-rate writing down
2229.This section ensures the calculation rules work properly when a change of accounting policy results in an intangible fixed asset that was subject to a fixed-rate writing down election under section 730 being treated as two or more assets. It is based on paragraph 116D of Schedule 29 to FA 2002.
2230.It gives rules:
to apportion the former tax written-down value of the original intangible fixed asset to each disaggregated asset on the basis of the ratio of their new accounting values; and
to determine how written-down value and cost recognised for tax purposes will be identified subsequently.
2231.The election under section 730 in respect of the original intangible fixed asset applies to that asset for the period prior to the change and to each of the disaggregated assets subsequently.
Section 877: Election for fixed-rate writing down in relation to resulting asset
2232.This section allows a fixed rate writing down election under section 730 to be made in respect of disaggregated assets and gives calculation rules to deal with the effects. It is based on paragraph 116E of Schedule 29 to FA 2002.
Section 878: Exclusion of credits or debits brought into account under other provisions
2233.This section prevents double counting and gives priority to other rules in this Part where double counting might otherwise arise. It is based on paragraph 116G of Schedule 29 to FA 2002.
Section 879: Subsequent events affecting asset subject to adjustment under this Chapter
2234.This section gives rules on subsequent accounting adjustments in respect of intangible fixed assets which have already been subject to the provisions of this Chapter on a change of accounting policy. It is based on paragraph 116H of Schedule 29 to FA 2002.
