Corporation Tax Act 2009

Accounting bases

313 Basis of accounting: “amortised cost basis”, “fair value accounting” and “fair value”

(1) The general rule is that the amounts to be brought into account by a company as credits and debits for any period of account for the purposes of this Part may be determined on any basis of accounting that is in accordance with generally accepted accounting practice and, in particular, an amortised cost basis of accounting or fair value accounting.

(2) But subsection (1) is subject to sections 307(3) and (4) and the following provisions (which require a particular accounting basis to be used)—

(a) section 312(5) and (6) (determination of credits and debits where amounts not fully recognised for accounting purposes),

(b) section 349(2) (application of amortised cost basis to connected companies relationships),

(c) section 382(2) (company partners using fair value accounting),

(d) section 399(2) (index-linked gilt-edged securities: application of fair value accounting),

(e) section 453(2) (application of fair value accounting where connected parties derive benefit from creditor relationships),

(f) section 454(4) (application of fair value accounting: reset bonds etc),

(g) section 482(2) (application of amortised cost basis of accounting to discounts arising from a money debt under a relevant non-lending relationship),

(h) section 490(3) (holdings in OEICs, unit trusts and offshore funds: application of fair value accounting), and

(i) section 534(1) (application of fair value accounting where section 523 applies).

(3) See also section 314.

(4) In this Part “amortised cost basis of accounting”, in relation to a company’s loan relationship, means a basis of accounting under which an asset or liability representing the loan relationship is shown in the company’s accounts at cost adjusted for cumulative amortisation and any impairment, repayment or release.

(5) In this Part “fair value accounting” means a basis of accounting under which assets and liabilities are shown in the company’s balance sheet at their fair value.

(6) In this Part “fair value”, in relation to a loan relationship of a company, means the amount which, at the time as at which the value is to be determined, is the amount which the company would obtain from or, as the case may be, would have to pay to a knowledgeable and willing person dealing at arm’s length for—

(a) the transfer of all the company’s rights under the relationship, and

(b) the release of all the company’s liabilities under it.

314 Power to make regulations about changes from amortised cost basis

(1) This section applies if the credits or debits to be brought into account for the purposes of this Part in respect of assets or liabilities of a company—

(a) are required in accordance with generally accepted accounting practice to be dealt with for accounting purposes using fair value accounting, and

(b) were previously dealt with for those purposes on an amortised cost basis.

(2) The Treasury may by regulations provide that the credits or debits must continue to be determined on an amortised cost basis of accounting.

(3) The regulations may—

(a) make different provision for different cases,

(b) make incidental, supplemental, consequential and transitional provision and savings, and

(c) make provision subject to an election or to other specified conditions.