2951.This section deals with the use of different accounting practices within a group of companies. It is based on section 51 of FA 2004.
2952.If the accounting treatments for a transaction under international accounting standards and UK GAAP are different, this could give rise to a tax mismatch: for example, one company might recognise a (deductible) loss before the other company recognised the corresponding (taxable) gain. If the two companies were members of the same group, the intra-group gain and loss would be cancelled out in arriving at the group’s consolidated profit before tax – but the group would still have the tax advantage of obtaining the deduction before having to recognise the taxable income.
2953.Accordingly, a tie-breaker provision is needed to deal with such cases. This section of the Act gives UK GAAP the priority, whether the tax advantage arises by accident or design.
Introduction Overview Overview Section 996: Use of different accounting practices within a group of companies