25. Long-term contracts

This section shall apply to a person who conducts a business, accounts for income tax purposes on an accrual basis with respect to that business and is a party to a long-term contract.

Amounts to be included or deducted in calculating the person’s income that relate to a long-term contract shall be taken into account on the basis of the percentage of the contract completed during each year of assessment.

The percentage of completion shall be determined by comparing the total expenses allocated to the contract and incurred before the end of a year of assessment with the estimated total contract expenses as determined at the time of commencement of the contract.

Subsection (5) shall apply where a long-term contract is completed and the person has an unrelieved loss attributable to that contract for the year of assessment in which the contract ended or any earlier year of assessment.

The Commissioner-General may allow the unrelieved loss to be carried back and treated as an unrelieved loss of an earlier year of assessment for the purpose of section 19. The amount carried back shall be limited to the profit, if any, from the contract for the year of assessment to which the loss is carried back.

A profit or a loss from a long-term contract for a year of assessment shall be determined by comparing amounts included in income under the contract with deductions under the contract for that year.

In this section –