The amendments have been made to ensure that certain adjustments arising on a change of accounting policy are taxed or allowed only once.
Amendments have been made to the loan relationships and derivative contracts rules which require certain adjustments arising on a change in accounting policy to be spread over ten years. The changes have been made to ensure that amounts are taxed or allowed only once.
The background to this is for periods of account beginning on or after 1 January 2016 the loan relationships and derivative contracts rules have been revised such that the starting point is to tax or allow amounts recognised as an item of profit and loss (i.e. recognised in the income statement), whereas previously amounts recognised in other comprehensive income would also have been taxable. Transitional rules were included in Finance (No.2) Act 2015 which were intended to ensure that certain amounts which had previously been recognised in other comprehensive income and were subsequently transferred to the income statement would only be taxed or allowed once.
An issue has been identified that certain amounts could be taxed or allowed both under the ten year spreading rules and the Finance (No.2) Act 2015 transitional rule. This has been dealt with by excluding such amounts from the ten year spreading rule. The amendments apply to periods of account beginning on or after 1 January 2017.
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