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HMRC internal manual

Business Income Manual

Deductions: timing: no specific statutory rule: revenue expenditure charged to current assets

A deduction may also be sought for expenditure charged to a current asset account in the balance sheet, such as ’prepayments’ or ‘deferred expenditure’. In such a case there is no general tax principle which overrides accounting treatment which is in accordance with GAAP. In particular, the case of Threlfall v Jones [1993] 66TC77 is authority for the view that there is no general tax principle to the effect that a deduction is available for revenue expenditure when it is incurred or paid.

This imposes a discipline for trading income purposes which is a very important feature of the way we compute taxable trading profit. As a general timing rule it is not possible for the trader to take a more conservative view for tax than for other purposes. So, if a company wishes to reduce its taxable profit it has to tell creditors, shareholders and the stock market the same story.