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HMRC internal manual

Corporate Finance Manual

Old rules: loan relationships: authorised accounting methods: changes of method

Changes in accounting methods

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

If a company appears to have changed its accounting method HMRC staff should ask a HMRC accountant for advice.

Imposed change

FA96/S90 gives the rules when there is a change of accounting method, to make sure that no profits or losses fall out of account, or get counted twice.

The rules in S90 apply where

  • there has been a change because the loan relationships legislation has imposed it (S90(1)(b)), and
  • the change has not been mirrored in the accounts of the company (S90(1)(c)).

You would expect normal accounting practice to recognise the adjustments needed. However, where the change of basis has been imposed by FA96 the accounts will show no change of basis. This legislation requires these adjustments to be made in the tax computations.

FA96/S90 (1A) ensures that S90 does not operate where the company itself has changed its accounting method.

Company change

FA96/S84(4A) gives the rules where the company changes its way of accounting for a loan relationship, and

  • S90 doesn’t apply to bring in any amounts, but
  • the accounts bring in an amount because of the change.

S84(4A) ensures that tax treatment follows the accounts treatment by bringing in the debit or credit for tax purposes.