PracticeAccounting FirmsProfession ‘quietly confident’ over Abstract 40

Profession 'quietly confident' over Abstract 40

Institutes feeling positive about the prospect of a spreading relief to ward off tax hits

Tax experts are ‘quietly confident’ that the Treasury will announce
tax-spreading relief over controversial revenue recognition rules in the
pre-Budget report, avoiding potentially disastrous bills for hundreds of
accounting practices.

Through institute umbrella body CCAB, the profession has called for the
Treasury to allow businesses affected by the clarification of revenue
recognition rules, known as Abstract 40, to spread their impending tax liability
over 10 years.

Abstract 40 is the clarification of revenue recognition requiring businesses
providing a service to recognise ongoing performance in accounts. The
clarification is likely to bring forward tax liabilities when it is introduced,
prompting the demand to spread the cost.

Frank Haskew, head of the ICAEW’s tax faculty, said he was ‘reasonably
positive and hopeful’ that spreading relief would be implemented.

‘HMRC and the Treasury understood our viewpoint, but what the outcome will be
we don’t know’, Haskew added.

The institutes recently provided further background upon request from the
Treasury over the potential for the one-off tax hit to cripple accounting firms,
and even some of their clients.

‘We have bent over backwards getting information together, demonstrating that
there will be hardship,’ said ACCA head of tax Chas Roy-Chowdhury.

He added that he would be ‘extremely disappointed and surprised’ if an
announcement was missing from the PBR.

Roy-Chowdhury has previously claimed that ‘hundreds of thousands of small
businesses’ could suffer unless spreading relief is introduced.

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