TaxPersonal TaxAlignment good news and bad

Alignment good news and bad

You can't help but wonder what the Inland Revenue does these days. What with self-assessment for individual and businesses, sometimes it seems that taxpayers and tax advisers are all part-time civil servants.

And now this. Buried in last week’s monster Finance Bill were new provisions for the tax treatment of research and development costs. With these rather than create its own statutory definition of just what constitutes R&D, the Revenue has passed the buck and adopted the definition employed by the Accounting Standards Board.

That’s good and bad news. On the one hand it ensures compatability between the tax and accounting treatment of costs. On the other it passes a whole new responsibility to the ASB, and one that it is not necessarily equipped to take on.

Whitehall’s willingness to harmonise tax and accounting profits more closely was signalled last year when the Revenue dropped the landmark Herbert Smith and Jenners cases. At the time the government said it believed in alignment.

Alignment is good news for business, particularly for companies in industries like construction and engineering, where accounting provisions for losses on long-term contracts are essential. But it puts the ASB in a difficult position.

The board has long been responsible for the definitions that underpin accounting standards. And with the R&D decision the Revenue seems to be signalling that it believes the ASB should also decide the definitions that underpin the tax system.

Related Articles

LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

3d Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

2w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

4m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter