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.
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)).