Over the next few years UK companies are likely to see changes to the accounting practice used to prepare financial statements. In particular, many UK companies will be required to apply one of EU-Endorsed IFRS, FRS 101 or FRS 102. HMRC has published two papers to assist companies with the adoption of “New UK GAAP”.

The purpose of these papers is to assist companies who are thinking of choosing or have already chosen to apply either FRS 101 or FRS 102. In particular, it provides an overview of the key accounting changes and the key tax considerations that arise for those companies that transition from current UK GAAP to the new standards.

The main section of the papers is split into two parts. Part A provides a comparison to the position under current UK GAAP and Part B provides a summary of the accounting and tax considerations that arise on transition. Whilst the papers concentrate on the Corporation Tax position, they may also assist individuals (and other entities) that are within the charge to Income Tax as many of the accounting and tax issues will be similar.

However, there are significant differences between the two tax regimes which are not reflected in these papers. In particular, there are specific rules for loan relationships, derivative contracts and intangible fixed assets which only apply for the purposes of Corporation Tax.

The papers reflect HMRC’s current thinking based on the law as it stood as the date of publication. It is intended that these papers will be updated as further information is available and as new accounting standards and tax law develop.