Although it is a long established principle of tax law that the accounting profit is the starting point for ascertaining taxable profit, the more recent, accounts based, statutory codes (loan relationships, derivatives, intellectual property) would seem to afford the accounts greater status. As demonstrated by DCC Holdings and aspects of the loan relationship consultation, this is not a comfortable position for HMRC. One response, as demonstrated in Versteegh and Greene King, has been to challenge the taxpayer’s accounts, particularly where FRS 5 is in point. If the taxpayer loses on the accounting at first instance, it will face an uphill struggle to overturn this on appeal.
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