Taxation of loan relationships—accounting framework and principles
Taxation of loan relationships—accounting framework and principles

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Taxation of loan relationships—accounting framework and principles
  • What is generally accepted accounting practice (GAAP)?
  • What is GAAP?
  • Relevance of GAAP to the loan relationships rules
  • UK GAAP and IFRS
  • UK GAAP v international accounting standards (IFRS)
  • Which is used and when?
  • What is the difference?
  • What are the key UK GAAP and IFRS accounting standards relevant to loan relationships?
  • UK GAAP
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

A foundational principle of the loan relationships regime is that companies are taxed on their borrowing and lending activities and other forms of corporate debt on the basis of the measure of profit and loss recognised in their accounts.

Whilst the loan relationships rules deviate from this principle in several circumstances, the close link between tax treatment and the accounts means that in order to be able to apply the computational provisions of the loan relationships rules it is necessary to have an understanding of how corporate finance transactions are reflected and measured for accounting purposes.

This Practice Notice considers the accounting framework and principles relevant to the taxation of loan relationships, and in particular the following:

  1. what is generally accepted accounting practice (GAAP)?

  2. UK GAAP v international accounting standards (IFRS)

  3. what are the key UK GAAP and IFRS accounting standards relevant to

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