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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Accounting for corporate finance: overview of guidance

Overview

This part of the guidance is intended to give HMRC staff an overview of the way corporate finance transactions may be presented in company accounts. However, HMRC staff should always first ask the advice of a local compliance accountant if the treatment of a corporate finance transaction in the accounts is not clear.

There currently exists a suite of accounting standards in the UK. Subject to certain restrictions detailed in the respective standards themselves, entities may choose or may be required to prepare their accounts under one of the following:

  • EU-endorsed IFRS: those accounts prepared in accordance with the International Financial Reporting Standards and the International Accounting Standards within the meaning of s395 of the Companies Act. Hereafter ‘IFRS’ for the purposes of the CFM.
  • New UK GAAP: FRS 100, FRS 101 and FRS 102. Entities applying New UK GAAP will, within the framework of FRS 100, apply one of FRS 101 or FRS 102. FRS 101 is effectively the recognition and measurement requirements of IFRS subject to some adjustments to ensure alignment with the UK Companies Act and also reduced disclosure requirements. FRS 102 is a new single standard which is closely aligned to, but is not the same as, IFRS. Hereafter ‘New UK GAAP’ for the purposes of the CFM, unless the context indicates otherwise.
  • Old UK GAAP: substantively the FRS’s, SSAP’s, UITF’s and relevant accepted practice in existence and applied prior to the introduction of New UK GAAP. Entities applying Old UK GAAP fall into two main camps - those applying FRS 26 (and related standards) and those that do not. For the purposes of the CFM, this is described as ‘Old UK GAAP (including FRS 26)’ and ‘Old UK GAAP (excluding FRS 26)’ respectively.
  • FRSSE: the Financial Reporting Standard for Smaller Entities. Entities that meet the eligibility criteria may prepare and file abbreviated accounts.
  • Micro entities: Companies that meet the eligibility criteria may prepare and file abridged accounts.

Guidance on IFRS is given in CFM20020. Guidance on New UK GAAP is at CFM20030 with Old UK GAAP and the FRSSE located at CFM20035.

Tax

Although the tax rules for loan relationships and derivative contracts broadly follow the accounting treatment, they are prescriptive in many areas about how accounting methods should be applied, and override the accounting treatment in other areas.