The Upper Tribunal has found for the taxpayers in a case mainly concerned with the interaction between the accounting and tax rules, which aimed to resolve the question as to whether charges made to a company’s P&L account under the accounting rules are deductible in that company’s corporation tax calculations. Although the legislation has since been amended to prevent deductions in these specific circumstances, the case is of interest because accounting standards are increasingly seeking to establish the fair value of the costs that companies incur in doing business and reflecting those costs in companies’ financial statements. This can result in a discrepancy between the costs of doing business in cash terms and those reflected in the financial statements of a company.
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The Upper Tribunal has found for the taxpayers in a case mainly concerned with the interaction between the accounting and tax rules, which aimed to resolve the question as to whether charges made to a company’s P&L account under the accounting rules are deductible in that company’s corporation tax calculations. Although the legislation has since been amended to prevent deductions in these specific circumstances, the case is of interest because accounting standards are increasingly seeking to establish the fair value of the costs that companies incur in doing business and reflecting those costs in companies’ financial statements. This can result in a discrepancy between the costs of doing business in cash terms and those reflected in the financial statements of a company.
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