MTT21200 | Calculating the effective tax rate: Adjusted profits: Prior period errors

An adjustment is required where:

• there is a change to the net value of a member’s assets and liabilities,

• that change is attributable to a correction of an error that was reflected in the member’s adjusted profits in a previous accounting period, and

• the error does not result in a post-filing adjustment of covered taxes.

The amount of that change should be reflected in the adjusted profits in accordance with section 146 of Finance (No.2) Act 2023.

Error results in a post-filing adjustment of covered taxes

Where an error results in a post-filing adjustment of covered taxes, that provision takes precedence. A recalculation of the prior period will be required under that provision and so the amount will not be reflected in the adjusted profits of the current period.