BIM34115 - Change of basis of computing taxable profits: adjustment income and expenses: change from realisation basis to mark to market (fair value) accounting

S236 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), S185 Corporation Tax Act 2009 (CTA 2009)

»Ê¹ÚÌåÓýapp change from realisation basis to mark to market accounting may be made as a result of:

  • an accounting policy change,

or

  • a tax adjustment change.

»Ê¹ÚÌåÓýapp mark to market basis must be a valid basis for tax purposes, that is, it must conform to GAAP. »Ê¹ÚÌåÓýapp HMRC current view is that where a business uses an accounting basis of mark to market (fair value) in its accounts, taking revaluation profits to the profit and loss account and not to a revaluation reserve, and this is in accordance with GAAP, there is no rule of law which permits a departure from this basis in computing the taxable profits.

»Ê¹ÚÌåÓýapp above provisions apply when there is a change from realisation to mark to market for trading stock as defined in S174 ITTOIA 2005 or S163 CTA 2009. »Ê¹ÚÌåÓýapp adjustment relating to the trading stock is brought into account when the stock is realised. This is subject to the making of an election for spreading of a positive adjustment, for which see BIM34120.