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HMRC Publishes Guidance on Trading Profits Computed Under FRS 105

By Sharon Cooke

In July 2017, HMRC added to their suite of guidance on the tax implications of new GAAP, with a new paper on the micro entity regime; FRS 105.

The document confirms that although FRS 105 itself is intended for companies, qualifying partnerships and limited liability partnerships, HMRC will generally accept calculations of profit for unincorporated businesses prepared under FRS 105 if they meet the size criteria to apply FRS 105. Broadly, the size criteria are met by a business in a year in which it does not exceed two or more of the following criteria:

(a) Turnover: £632,000

(b) Balance sheet total: £316,000

(c) Number of employees: 10

Noting that the FRSSE is no longer an option for periods commencing on or after 1 January 2016, it is expected that FRS 105 based accounts will now be popular within both small corporate and small non-corporate client groups.

The HMRC paper is therefore aimed at both companies that are within the charge to Corporation Tax and individuals (and other entities) within the charge to Income Tax.

While the paper doesn’t tell us anything new (since previous guidance for larger entities), it is a useful reference source for corporation tax or income tax computations, based on FRS 105 accounting principles.

The paper can be viewed here. 

July 2017 


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