Adopting new UK GAAP: How to minimise HMRC questions

examining accounts header image
By Susan Cattell, ICAS Head of Taxation (England and Wales)

19 July 2016

Susan Cattell outlines the key points from a recent useful HMRC webinar.

Talking Points are weekly, interactive, digital meetings designed specifically for tax agents; they include presentations from HMRC experts and Q&A sessions with agent participants.

A recent one was presented by two chartered accountants working in HMRC’s team of advisory accountants. The purpose was to raise awareness of issues they have encountered in the accounts of early adopters of new UK GAAP and to help accountants avoid HMRC raising questions on accounts and computations.

Why do HMRC care about new UK GAAP?

The presenters ran through a few of the reasons why HMRC is interested in financial statements and new UK GAAP:

  • The starting point for taxable business profits from a trade is the “profit prepared in accordance with Generally Accepted Accounting Practice” (GAAP).
  • Rules in other parts of the tax legislation, for example, debits and credits in accordance with GAAP for taxable loan relationships or differences in accounting values of intangibles.
  • HMRC uses the information disclosed to check entities’ returned tax liabilities.

The presenters noted that a number of the accounting issues and errors they found affected the tax computations.  Some of the issues also undermined their confidence in the overall accuracy of the information provided.

What issues have HMRC identified?  

The headline list included:

  • Errors/inconsistencies in disclosures.
  • Inadequate disclosure.
  • Apparent errors in transition accounting.
  • Incorrect revised accounting treatment in respect of financial instruments.
  • Hard to follow the link between transitional adjustments reconciliation note and the tax computation.

The presenters talked through the details and outlined some practical steps accountants could take to avoid HMRC coming back with questions about the accounts and computations. It is particularly important to make clear how the transitional adjustments link to the tax computation figures.

Listen to the presentation

You can listen to a recording of the presentation.

HMRC also provided links to guidance posted on the internet:

FRS102 and FRS101 overview papers and the UK tax implications.

Draft guidance on the corporation tax treatment of non-interest bearing loans.

Future Talking Points webinars

Recordings of the Talking Points webinars only include the presentations – not the Q&A section of the webinars. If you want to sign up for future live webinars – where you will get the chance to ask questions, see other questions raised and hear HMRC’s answers, go to the HMRC Talking Points page. This gives details of forthcoming sessions. Once a month HMRC also posts links to recordings of earlier sessions.  

Courses on FRS102 and Taxation

If you would like some more information on FRS102 and taxation, ICAS and BPP provide courses in Glasgow and Edinburgh in November. Book a place now.

Any feedback?

Send an email to icas-tax@icas.com if you have any feedback on this HMRC Talking Points session or any other HMRC digital support tools, including digital Working Together meetings (which were discussed earlier this year). Digital Working Together - time to get involved.

Topics

  • Corporate and financial reporting
  • Tax
  • Accountancy

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