Finance Act 2004

Adjustment on change of accounting policy

72 In Part 13 of that Schedule (supplementary provisions), after paragraph 116 insert—

“Adjustment on change of accounting policy

116A (1) This paragraph applies where—

(a) there is a change of accounting policy in drawing up a company’s accounts from one period of account (the “earlier period”) to the next (the “later period”), and

(b) the approach in each of those periods accorded with the law and practice applicable in relation to that period.

(2) This paragraph applies, in particular, where—

(a) the company prepares accounts for the earlier period in accordance with UK generally accepted accounting practice and for the later period in accordance with international accounting standards, or

(b) the company prepares accounts for the earlier period in accordance with international accounting standards and for the later period in accordance with UK generally accepted accounting practice.

(3) If there is a difference between—

(a) the accounting value of an intangible fixed asset of the company at the end of the earlier period, and

(b) the accounting value of that asset at the beginning of the later period,

a corresponding debit or credit (as the case may be) shall be brought into account for tax purposes in the later period.

(4) The amount of the debit or credit to be brought into account for tax purposes is:

where—

• Accounting Difference is the amount of the difference specified in sub-paragraph (3);

• Tax Value is the tax written down value of the asset at the end of the earlier period; and

• Accounting Value is the accounting value of the asset at the end of the earlier period.

(5) This paragraph does not apply in relation to an intangible fixed asset in respect of which an election has been made under paragraph 10 (election for writing down at fixed-rate).

(6) This paragraph does not apply to a difference between the accounting value of an intangible fixed asset in different periods of account to the extent that, in respect of that difference, a credit or debit is brought into account for tax purposes under—

(a) paragraph 12 (reversal of accounting gain),

(b) paragraph 15 (gain on revaluation), or

(c) paragraph 17 (reversal of accounting loss).

(7) Where or to the extent that an adjustment is made under this paragraph, no adjustment under Schedule 22 (computation of profits: adjustment on change of basis) shall be made.”.