Taxes Consolidation Act 1997 section 94

Conventional basis: general charge on receipts after change of basis

Section 94 ensures that when a trade or profession changes its accounting basis, any income that was earned before the change but not yet brought into the tax computation is caught for tax under Case IV of Schedule D, preventing it from escaping tax altogether.

• When a business switches from a conventional accounting basis to the earnings basis (or changes between conventional bases), any pre-change income not already taxed is charged to tax under Case IV of Schedule D.
• The charge applies to all sums that arose from the trade or profession before the change, provided they were not already included in any tax computation and are not otherwise chargeable to tax. A deduction may be claimed for related expenses that would have been allowable but for the change.
• For professions, where work in progress at the date of the change is debited in the post-change accounts but no matching credit appeared in the pre-change accounts, that work-in-progress amount is treated as a taxable receipt in the year the change occurs.
• A change from a conventional basis to the earnings basis is deemed to occur at the end of a period whose profits were computed on the conventional basis, if the following period's profits are computed on the earnings basis. A change between two different conventional bases occurs at the end of the earlier period.