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Conventional basis: general charge on receipts after change of basis.
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26.—(1) Where, in the case of any trade or profession the profits or gains of which are chargeable to tax under Case I or Case II of Schedule D, there has been—
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(a) a change from a conventional basis to the earnings basis, or
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(b) a change of conventional basis which may result in receipts dropping out of computation,
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tax shall be charged under Case IV of Schedule D in respect of sums to which this subsection applies which are received after the change, and before the trade or profession is permanently discontinued.
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This subsection applies to all sums arising from the carrying on of the trade or profession during any period before the change (not being sums otherwise chargeable to tax) in so far as their amount or value was not brought into account in computing the profits or gains for any period.
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(2) Where, in the case of any profession the profits or gains of which are chargeable to tax under Case II of Schedule D—
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(a) there has been a change from a conventional basis to the earnings basis, or a change of conventional basis, and
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(b) the value of work in progress at the time of the change was debited in the accounts and allowed as a deduction in computing profits for tax purposes for a period after the change,
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then, in so far as no counterbalancing credit was brought into account in computing profits for tax purposes for any period ending before or with the date of the change, tax shall be charged under subsection (1) in respect of that amount for the year of assessment in which the change occurred as if that amount were a sum to which the said subsection (1) applies, and the change of basis were a change of the kind described in that subsection.
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(3) In this section references to work in progress at the time of a change of basis shall be construed in accordance with section 23 (5) substituting therein for this purpose references to the change of basis for references to the discontinuance.
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(4) There is a change from a conventional basis to the earnings basis at the end of a period the profits or gains of which were computed on a conventional basis if the profits or gains of the next succeeding period are computed by reference to earnings; and, if the profits or gains of two successive periods are computed on different conventional bases, a change of conventional basis occurs at the end of the earlier period.
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(5) This section shall not apply where the change took place before the date of the passing of this Act and, before that date—
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(a) the decision had been taken to prepare accounts reflecting the change, or
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(b) the trade or profession had been permanently discontinued,
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but, subject as aforesaid, has effect as respects sums received at any time before or after that date.
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