BIM70100 - Cash basis: alternative basis: barristers: example of spreading of adjustment income
Suppose the adjustment income at 31 March 2011 is 拢80,000. If the business has profits exceeding 拢80,000 (before Capital Allowances) in each of the next nine years beginning with the year the adjustment income would otherwise be chargeable, 拢8,000 will be charged to tax.
The balance of 拢8,000 will be taxed (as adjustment income) in the tenth tax year.
However, if profits for the year ended 30 April 2014 are only 拢50,000 then only 拢5,000 will be charged to tax for 2015-16 under S238(2)(b) ITTOIA 2005. The remaining 拢3,000 will end up being charged in year 10, along with the normal 拢8,000 for that year and any other amounts postponed from other years because of insufficient profits under S238(2)(b) ITTOIA 2005.