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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Old rules: derivative contracts: basic rules pre FA 2004: applying the correct method

Applying the correct method

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

To identify the right method to be used for tax purposes

  • identify the accounting basis used in the statutory accounts
  • decide if this is an authorised basis (CFM84010), or equates to an authorised basis (CFM84130).

Statutory accounts

These are defined in FA02/SCH26/PARA52(1). The definition covers accounts drawn up under

  • Companies Act 1985
  • Companies Act (Northern Ireland) Order 1986
  • Section 70 Friendly Societies Act 1992.

If no accounts have been drawn up under these regulations, then the definition extends to

  • any accounts the company must produce according to the legislation of the country of incorporation (which may be a part of the UK if none of the three laws above apply - e.g. for building societies), or failing that
  • the accounts that most closely match the requirements of the Companies Act 1985.