95A Change of basis of computation of profits or gains of a trade or profession.

(1) In this section—

“Accounting Standards Board” means the body known as the Accounting Standards Board established under the articles of association of The Accounting Standards Board Limited, a company limited by guarantee and registered in England;

“chargeable period” has the same meaning as in section 321(2).

(2) Where—

(a) in a case to which section 94(3) does not apply there has been a change in the basis of valuing work in progress for the purposes of computing profits or gains of a trade or profession chargeable under Case I or II of Schedule D, and

(b) the amount (in this subsection referred to as the “relevant amount”) of the value of work in progress at the time of the change is allowed as a deduction in computing profits or gains for tax purposes for a chargeable period after the change (in this section referred to as the “relevant period”),

then, in so far as the counterbalancing credit in connection with that work in progress, taken into account in computing profits or gains for tax purposes for the period preceding the relevant period, is less than the relevant amount, tax shall be charged under Case I or II of Schedule D for the relevant period on so much of the relevant amount as exceeds that credit.

(3) Where subsection (2) applies in respect of a partnership trade or profession, any amount chargeable to tax under subsection (2) shall be treated for the purposes of the Tax Acts as an amount of profits or gains of the partnership trade or profession.

(4) Where subsection (2) applies to a change in the basis of computing profits or gains for a chargeable period ending in the period of 2 years beginning on 22 June 2005 and the change arises by virtue only of the guidance issued on 10 March 2005 by the Urgent Issues Task Force of the Accounting Standards Board on Application Note G of Financial Reporting Standard 5 (known as “UITF Abstract 40”), then tax shall not be charged in respect of the excess amount in the relevant period but instead—

(a) where the person by whom the trade or profession is carried on is a person other than a company, tax shall be charged—

(i) on one-fifth of the excess amount for the relevant period, and

(ii) on a further one-fifth of the excess amount for each succeeding chargeable period until the whole amount has been accounted for, and

(iii) where any chargeable period referred to in subparagraph (i) or (ii) is the chargeable period in which the trade or profession was permanently discontinued, then tax shall be chargeable for that chargeable period on such fraction of the excess amount referred to in those subparagraphs as is required to ensure that the whole of that excess amount is accounted for,

and

(b) where the person by whom the trade or profession is carried on is a company—

(i) tax shall be charged on a part of the excess amount for each chargeable period falling wholly or partly into the period of 5 years beginning at the commencement of the relevant period referred to in subsection (1): and the part of the excess amount on which tax is to be charged for any such chargeable period shall be such amount as bears to the excess amount the same proportion as the length of the chargeable period, or the part of the chargeable period falling into the period of 5 years, bears to 5 years, and

(ii) where any chargeable period referred to in subparagraph (i) is the last chargeable period in which the company carried on a trade or profession then tax shall be charged for that chargeable period on such part of the excess amount as is required to ensure that the whole of that amount is accounted for.