(1)This section applies if there is a change of basis from—
(a)not recognising a profit or loss on an asset until the asset is realised, to
(b)bringing assets into account in each period of account at a fair value.
(2)So far as—
(a)a receipt within item 1 of step 1 in section 231 represents the fair value of an asset that is trading stock, or
(b)an expense within item 2 of that step relates to such an asset,
adjustment income or (as the case may be) an adjustment expense is treated as not arising until the period of account in which the value of the asset is realised.
(3)In the case of adjustment income, this is subject to any election under section 237 (election for spreading).
(4)In this section “trading stock” has the same meaning as in section 174.
Modifications etc. (not altering text)
C1S. 236 applied (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 524(5), 526(6), 1034 (with transitional provisions and savings in Sch. 2)
(1)If section 236 applies, the person who is liable to tax on any adjustment income may elect for the adjustment income to be spread over 6 periods of account.
(2)The election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the change of basis occurs.
(3)If an election is made, an amount equal to one-sixth of the amount of the adjustment income—
(a)is treated as arising, and
(b)is charged to tax,
in each of the 6 periods of account beginning with the first period to which the new basis applies.
(4)But if, before the whole of the adjustment income has been charged to tax, the person permanently ceases to carry on the trade, the whole of the amount so far as not previously brought into charge to tax—
(a)is treated as arising, and
(b)is charged to tax,
immediately before the cessation.