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HMRC internal manual

Corporate Finance Manual

Old rules: loan relationships: authorised accounting methods: which authorised method: approach to adopt

Applying the correct authorised method

This guidance applies to periods of account beginning before 1 January 2005

To check whether the right authorised method has been applied for tax purposes

  • identify the accounting basis the company has used in its statutory accounts
  • decide if this

    • is an authorised basis, or
    • equates to an authorised basis.

Authorised basis

If the accounts use an authorised basis, this is acceptable for tax purposes and no adjustment is needed unless the company is forced by specific legislation to make adjustments.

Equates to an authorised basis

If the method is regarded as the same as an authorised basis, the accounts method is followed for tax purposes, subject to any adjustments to the method that FA96/S85 imposes. (FA96/S86(3)).

Neither authorised nor equates to an authorised basis

If the company uses a basis that is neither authorised nor equates to an authorised method then, by default, the company must use the authorised accruals method for tax purposes. (FA96/S86(4)).