The accounting concept of materiality is used in preparing
accounts which are the starting point for ascertaining the taxable
profit or loss.
Some relaxation of the requirement for full accuracy has been
made for computing taxable profits.
The acceptance of rounding to £1000 in certain limited
circumstances. This treatment was publicised by press release
PR18/93 and limits the use to large single businesses in an attempt
to reduce their compliance burdens. It is explained in Statement of
Practice 15/93 that clearly shows that this is 'concessionary'
treatment and is designed to minimise compliance burdens. It is to
operate 'fairly as a whole' which means that rounding up and down
applies and that no rounding is possible in situations when the
records would have to have been accessed anyway (as then there is
no compliance saving).
In the completion of SA returns, pence not included, income
and gains rounded down to the nearest pound and tax credits and
deductions rounded up.
Some entries in accounts depend on the estimates and
judgement made by the preparers of the accounts and will lie within
a range of values. The requirement that information should be free
from deliberate or systematic error should prevent materiality
judgements being skewed in a particular direction.
But ultimately the factual accuracy of any item in accounts
is a matter for the Commissioners to decide.
