Accounting Standards - the UK tax implications

Finance Acts in 2004, 2005 and 2006 and regulations made under powers given by those Acts have included measures to ensure that companies choosing to adopt International Accounting Standards (IAS) or certain UK standards that are equivalent to IAS to draw up their accounts receive broadly equivalent tax treatment to companies that continue to use “mainstream” UK GAAP (UK Generally Accepted Accounting Practice).

These changes are made necessary in part by the increasing reliance in UK Tax law on accounts drawn up in accordance with GAAP.

These notes give further details about the legislation in recent Finance Acts and some of the background on the changing relationship between accounting standards and tax law.

• Introduction
• Table of comparisons between IAS and UK GAAP. This includes detailed notes on the tax implications for companies adopting IAS (and equivalent UK standards) and on areas where there is no change to the current position – for example pensions and share schemes.
• Background on IAS/UK GAAP and why it is important for tax. This section gives details on why tax departs from the accounts and where IAS may lead to changes in the way items are accounted for, in particular the increased use of fair value accounting.

The site reflects the Government’s current thinking and is updated as further information is available.

• This site was last updated on 24 July 2006.