Finance Act 1998

4 (1) This paragraph provides for the spreading of the adjustment charge in certain cases where an individual—

(a) has been entitled to compute the profits of a profession or vocation on a basis that does not comply with section 42 of this Act (true and fair view), or would not have complied with that section if it had been in force, and

(b) changes to an accounting basis that does comply with that section.

(2) The cases in which this paragraph applies are where a change of basis is made to comply with that section—

(a) on that section coming into effect in relation to periods of account beginning after 6th April 1999, or

(b) on the exemption given by section 43 of this Act (barristers and advocates in early years of practice) coming to an end or ceasing to apply.

(3) Where this paragraph applies the adjustment charge is spread over ten years of assessment, as follows.

(4) In each of the nine years of assessment beginning with that in which the whole amount would otherwise be chargeable to tax, an amount equal to whichever is the less of—

(a) one-tenth of the amount of the adjustment charge, and

(b) 10 per cent. of the profits of the profession or vocation for that year of assessment,

is treated as arising and chargeable to tax.

For the purposes of paragraph (b) the profits of the profession or vocation means the profits as computed for the purposes of Case II of Schedule D, leaving out of account any allowances or charges under the [1990 c. 1.] Capital Allowances Act 1990.

(5) In the tenth year of assessment the balance of the adjustment charge is treated as arising and chargeable to tax.

(6) If before the whole of the adjustment charge has been charged to tax the profession or vocation—

(a) is permanently discontinued, or

(b) is treated as permanently discontinued under section 113(1) of the Taxes Act 1988 (change of persons carrying on profession or vocation),

the preceding provisions of this paragraph continue to apply, but with the omission of the alternative limit in sub-paragraph (4)(b) by reference to profits of the profession or vocation.

(7) This paragraph has effect subject to any election under paragraph 5.