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CH 2: Adjustment for prepayments
or “How to handle money spent on things not fully used by tax year's end”
You could also call this:

“Rules for counting unpaid wages as income”

If you have promised to pay someone for work they’ve done for you, but you haven’t paid them yet, this part of the law might apply to you. It says that if you owe someone money for work, but you haven’t paid them, that unpaid amount is counted as your income in the tax year. This happens because of another rule called section EA 4, which talks about delayed payments for work. The money you still owe becomes part of your income for that year, even though you haven’t actually paid it out yet. This rule helps make sure that all the money you’re supposed to pay for work is counted in your income, even if you haven’t handed it over yet.

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Next up: CH 4: Adjustment for change to accounting practice

or “How changing your accounting method affects money owed for tax purposes”
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Part C Income
Adjustments

CH 3Adjustment for deferred payment of employment income

  1. This section applies when a person has, under section EA 4 (Deferred payment of employment income), an unpaid amount of expenditure on employment income that is to be treated as income in an income year.

  2. The unpaid amount is income of the person in the income year.

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