Corporation Tax Act 2010 section 996

Use of different accounting practices within a group of companies

Section 996 prevents groups of companies from obtaining a tax advantage where one group company uses international accounting standards and another uses UK generally accepted accounting practice for the same or linked transactions.

• Where two companies in the same group use different accounting frameworks (one using international accounting standards, the other UK GAAP), and a transaction or series of transactions between them would produce a tax advantage due to those different frameworks, the tax rules override the international accounting standards treatment.
• In such cases, the Tax Acts apply to the transaction or series of transactions as though both companies prepared their accounts under UK generally accepted accounting practice, eliminating the mismatch.
• The definition of whether companies belong to the same group follows the rules in section 170(3) to (6) of the Taxation of Chargeable Gains Act 1992.
• A series of transactions can still be treated as involving both companies even if neither is a direct party to every transaction in the series, or if one or both companies are not parties to the underlying arrangements.