FA98/S42 as amended by FA02/S103 requires that the profits of a
business should be computed in accordance with generally accepted
accounting practice. This is defined at ICTA88/S836A to mean
generally accepted accounting practice with respect to accounts of
UK companies that are intended to give a true and fair view.
The accounting standards issued by the UK Accounting
Standards Board do not give detailed accounting guidance for every
possible transaction. Where there is no specific standard a
relevant International Accounting Standard or USA standard which
gives detailed guidance for a particular transaction may throw some
light onto currently accepted best practice. In particular, if an
entity has correctly followed an IAS or USA standard, which does
not conflict with UK GAAP, including the requirements of FRS18, and
this accurately reflects the facts, the accountancy treatment will
comply with the requirement of FA98/S42.
However where there is a currently existing UK standard which
applies to the transaction the UK standard should be followed
rather than any international standard to bring the accounts and
tax computation within the requirement of FA98/S42.
The current UK accounting standard which applies to stock
valuations is SSAP9. This is supplemented for tax purposes by
Business Economic Note BEN19, in which we describe stock valuation
methods which are acceptable for tax purposes. We consider that
self assessment returns, including the accounts and tax
computations, which follow the principles in SSAP9 will comply with
the requirements of FA98/S42.
IAS41 prescribes the accounting treatment related to
agricultural activity. At present the Inland Revenue do not
consider that its use is within generally accepted accounting
practice as defined in ICTA88/S836A. If accounts are prepared in
accordance with IAS41 and tax computation adjustments are made to
bring the stock valuation figures to SSAP9 figures this is
acceptable for tax purposes.
