Taxes Consolidation Act 1997, Schedule 17A paragraph 2

Transitional measures (amounts receivable and deductible)

Paragraph 2 of Schedule 17A provides transitional rules to prevent double counting of income or expenses (or amounts falling out of the tax system entirely) when a company moves from former GAAP to relevant accounting standards (IFRS or current GAAP) for the purposes of computing trading profits under Case I or Case II of Schedule D.

• A "taxable amount" and a "deductible amount" are computed for each company making the transition; the taxable amount captures income that would otherwise escape the tax net and expenses that would otherwise be deducted twice, while the deductible amount captures income that would otherwise be taxed twice and expenses that would otherwise never be deducted.
• Where the taxable amount exceeds the deductible amount, the excess is treated as a trading receipt of the company's first relevant accounting standards period, but is spread on a time basis over accounting periods falling wholly or partly within the five-year period beginning at the start of that first period.
• Where the deductible amount exceeds the taxable amount, the excess is treated as a deductible trading expense of the company's first relevant accounting standards period, spread on the same five-year time basis.
• If the company ceases to trade during the five-year spreading period, any balance not yet brought into account is taxed or allowed in full in the final accounting period of the trade.