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HMRC internal manual

Business Income Manual

Specific deductions: provisions: examples of allowable provisions

Examples of provisions which will generally be allowable to the extent that they are sufficiently accurate and accord with GAAP include those made:

  • in the period of sale for the cost of work under a warranty which a trader gives on the sale of merchandise (or under consumer protection legislation),
  • for commission refundable by an insurance intermediary on the lapse of a policy where the commission is recognised as income at the inception of the policy,
  • by builders for rectification work, including retentions up to the level that these have been recognised as income within accounts,
  • for future maintenance of plant and machinery made in circumstances that appear indistinguishable from those in Johnson v Britannia Airways Ltd [1994] 67TC99 (such provisions are however outlawed by Section 21 of FRS102 for assets owned by the business).