Finance Act 2002

64 Adjustment on change of basis

(1) The provisions of Schedule 22 to this Act have effect as to the adjustment or adjustments to be made for tax purposes where—

(a) there is, from one period of account to the next of a trade, profession or vocation, a change of basis in computing profits for the purposes of Case I or II of Schedule D,

(b) the old basis accorded with the law or practice applicable in relation to the period of account before the change, and

(c) the new basis accords with the law and practice applicable in relation to the period of account after the change.

For the purposes of paragraphs (b) and (c) the practice applicable in any case means the accepted practice in cases of that description as to how profits should be computed for the purposes of Case I or II of Schedule D.

(2) A “change of basis” means—

(a) a relevant change of accounting approach, or

(b) a change in the tax adjustments applied.

(3) A “relevant change of accounting approach” means a change of accounting principle or practice that, in accordance with generally accepted accounting practice, gives rise to a prior period adjustment.

(4) A “tax adjustment” means any such adjustment as is mentioned in section 42(1) of the Finance Act 1998 (c. 36) (adjustments required or authorised by law in computing profits for tax purposes).

(5) A “change in the tax adjustments applied”—

(a) does not include a change made in order to comply with amending legislation not applicable to the previous period of account, but

(b) includes a change resulting from a change of view as to what is required or authorised by law, or as to whether any adjustment is so required or authorised.

(6) The provisions of this section and Schedule 22 to this Act have effect in place of the provisions of section 44 of, and Schedule 6 to, the Finance Act 1998 (c. 36).