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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate finance: change of accounting basis: bringing amounts into account

S316 (loan relationships) and S614 (derivative contracts) are the main provisions for bringing transitional adjustments into account for Corporation Tax purposes. They are wide-ranging provisions which look to bring into account the difference between the tax-adjusted carrying value of an asset or liability at the end of one period and the tax-adjusted carrying value at the start of the period that immediately follows it.

This difference is generally brought into account in the later period in the same way as a debit or credit amount brought into account under generally accepted accounting practice. In cases where the adjustment arises from a change in accounting policy of the company, the COAP Regulations might stipulate a different treatment (for example for the amount to be spread).  

The COAP Regulations were introduced in 2004 and prescribe how amounts that arise on a change of accounting policy should be brought into account for Corporation Tax. In most cases, they look to spread amounts over ten years although certain amounts might not be brought into account at all or are brought into account on a different basis. So while the legislation in CTA09 will quantify the amount of adjustment, it is the COAP Regulations which determine when, if at all, this is taxed or relieved.  (See CFM76070)


A company prepares accounts for APE 31 December 2016 which show a loan asset with a carrying value of £100. The company adopts a new accounting policy for in its accounts for APE 31 December 2017 and restates the 31 December 2016 comparatives so that the loan asset now has a closing carrying value of £150. The opening carrying value of the asset as at 1 January 2017 will also be £150. The carrying value does not, in this case, need any adjustment to arrive at the tax-adjusted carrying value.

S316 will apply to bring in the difference between the tax-adjusted carrying value of the loan asset at the end of the earlier period (£100) and the value at the beginning of the later period (£150). A credit amount of £50 will therefore be brought into account although this might be spread, or deferred altogether, under the COAP Regulations.  

Previous approach (pre-2016)

For accounting periods beginning before 1 January 2016, the tax treatment would depend on whether a prior period adjustment was recognised in the accounts in accordance with generally accepted accounting practice. If a prior period adjustment was recognised, CTA09/S308 (loan relationships) and CTA09/597 (derivative contracts) would bring this amount into account regardless of where it was recognised in accounts.

Where the accounts did not show a prior period adjustment (for example where the company has adopted IFRS, FRS 101 or FRS 102 for the first time) then S308 and S597 would be unable to bring any amount into account. Instead, S315-S319 (loan relationships) and S613-S615 (derivative contracts) would engage to bring the transitional adjustment into account.

Prior to 2016, S316 and S613 were limited to changes in accounting policy. They did not apply where a change in accounting basis was required as a result of the application of tax statute. In particular, CTA09/S350 and S351 applied where a loan relationship either became, or ceased to be, a connected companies relationship under CTA09/S349. (See CFM35180)

Further guidance

  • Meaning of tax-adjusted carrying value (CFM76040)