Commentary

B2.108 References to receipts and expenses

Business tax
Business tax | Commentary

B2.108 References to receipts and expenses

Business tax | Commentary

B2.108 References to receipts and expenses

Wherever an income tax or corporation tax statute refers to 'receipts' or 'expenses' in the context of the calculation of the profits of a trade, then unless otherwise provided this is to be interpreted as references to items brought into account as credits or debits when calculating the profits. The use of these terms is not to be taken as an implication that the amounts have actually been received or paid1. This provision does not apply if a cash basis election has been made for income tax purposes from 2013/14 (see B2.112)2.

The meaning of expenses was one of the issues discussed in the NCL Investments Ltd3 case. The matter to be determined was whether debits to the profit and loss accounts of the taxpayer companies, which were required by IFRS 2 and resulted from the grant to their employees by the trustees of an employee benefit scheme of options to acquire shares in the holding company of the group, were allowable deductions for corporation tax purposes. HMRC argued that the debits were not deductible on the basis that an expense had not actually been incurred, they merely arose as an accounting entry. HMRC also stated that the debits represented capital

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