The time at which income should be recognised for tax purposes
can be a complex area. Detailed guidance is provided at
BIM31090 - BIM31110 to which reference
should be made in any case of doubt or difficulty. Some general
principles applying to the recognition of a grant that is revenue
in character were set out in an article on arable area payments
published in TB10B (February 1994).
General principles
A basis which is arrived at from the correct application of
generally accepted accountancy principles to the particular facts
is a valid basis for determining timing issues provided it does not
offend the taxing statutes as interpreted by the Courts. In some
cases there may be more than one acceptable basis; but a valid
basis, once adopted, should be used consistently unless there is
good reason for a change. (See
BIM34000 onwards.)
Where an acceptable basis has been adopted in the accounts
attempts to use some other acceptable basis by means of adjustments
in the tax computations should be resisted. (See
BIM31027 where accounts have been
prepared using accounting practice prescribed in IAS41.)
HMRC interpretations on farming grants
Our views on acceptable bases for recognising certain farming
grants have been published as follows:
Article in TB10 (February 1994):
Article in TB14 (December 1994):
See BEN19 - now help sheet IR232 - (reproduced at
BIM55410),
BIM55430 and
BIM55450 regarding the effect of certain
grants on stock valuations.
Timing issues can be complex and hard to resolve. Unless, in
a particular case, a substantial deferment of tax is potentially
involved, you should not normally challenge the basis used for
recognising grants and subsidies in farming accounts so long
as:
