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HMRC internal manual

Business Income Manual

Change of basis of computing taxable profits: introduction and flowchart

The basis on which taxable profits of a trade, profession or vocation are computed may change from one period of account to the next. This may be as:

  • a result of a change in the legislation,
  • a change in our understanding of the legislation,
  • a change of accounting policy, or
  • to correct errors.

These different situations have been dealt with differently by case law and legislation.

For tax purposes a major distinction is whether the old basis was a valid or an invalid basis. A valid basis is one, which conforms to the law or practice applicable to the period of account concerned, an invalid basis conforms to neither.


Please see the flowchart (Word 29.5KB) for a diagrammatic representation.