CH 23 - Tax Law and Accounting Practice

Question 1

What is HMRC looking more towards of what … to determin the tax treatment of income and expenditure?

Answer 1

HMRC are looking more and more towards accounting standards to determine the tax treatment of income and expenditure.

Question 2

When HMRC cannot dispute the treatment ?

Answer 2

When GAAP (accounting treatment) is folllowed unless statute or case law states otherwise.

Question 3

Which Case Law forced HMRC to withdraw SP 3/90 which prohibited anticipation of losses?

Answer 3

Herbert Smith v Honour case 1999
which looked at the provision for losses on a lease (onerous leases)

1999

Question 4

What case is well known where HMRC can request appropriate adjustment if HMRC can show that GAAP has not been followed?

Answer 4

they did in the Gardner Mountain case

1948

Question 5

As GAAP in move twards FV accounting and recognising movements in balance sheet values. What right has HMRC in regards to the regulations?

Answer 5

HMRC have the right to issue regulations requiring amounts recognised for GAAP to be adjusted in the tax computations.

Question 6

How one-ff adj to the accounts as as a result of a change in accounting policy are taxed?

Answer 6

They are taxable or relievable as profits/expenses of the trade.

Question 7

How affected period of account is dealt with where a change from an invalid basis to a valid basis is required?

Also for earlier years?

Answer 7

A change from an invalid basis to a valid basis requires each period of account affected to be dealt with separately.

Correcting errors of earlier years depends upon the enquiry process or discovery assessment process being in time.

Question 8

What famouse case reinforced SP 3/91which requires the tax treatment of finance leased assets to follow correct accounting treatment?

Answer 8

Gallagher v Jones