2951.This section deals with the use of different accounting practices within a group of companies. It is based on section 51 of FA 2004.
2952.If the accounting treatments for a transaction under international accounting standards and UK GAAP are different, this could give rise to a tax mismatch: for example, one company might recognise a (deductible) loss before the other company recognised the corresponding (taxable) gain. If the two companies were members of the same group, the intra-group gain and loss would be cancelled out in arriving at the group’s consolidated profit before tax – but the group would still have the tax advantage of obtaining the deduction before having to recognise the taxable income.
2953.Accordingly, a tie-breaker provision is needed to deal with such cases. This section of the Act gives UK GAAP the priority, whether the tax advantage arises by accident or design.