The Consultative Committee of Accounting Bodies has stepped up its campaign
for a decade of tax relief to reduce potentially crippling bills for
professional services firms.
The CCAB is pressing the Treasury for the relief over Abstract 40, the
clarification of a revenue recognition rule that requires businesses providing a
service to recognise ongoing performance in accounts.
Abstract 40 is likely to bring forward the liabilities when it is introduced,
prompting the demand to spread the cost. This week, the CCAB sent a further
letter to paymaster general Dawn Primarolo outlining evidence of the potentially
disastrous impact of Abstract 40.
‘Evidence suggests that firms will be hard-hit,’ said Frank Haskew, head of
the ICAEW tax faculty. ‘We maintain a 10-year spreading relief is justified.’
Haskew said that the CCAB had looked at the potential tax effect upon several
dozen firms, and would look for agreement to be introduced soon.
‘Something needs to be done now hopefully so something is in the PBR and
next year’s Finance Act. We need certainty shortly,’ he said.
The rule applies to accounting periods ending on or after 22 June 2005. Yet
despite ongoing discussions, Accountancy Age understands that the
Treasury has not been convinced that 10-year spreading is appropriate, or that
mitigation should be allowed for every size of business affected.
‘The sooner we can get clarity the better,’ said ACCA head of tax Chas
The Treasury was unavailable for comment.
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