Corporation Tax Act 2009 section 318

Change of accounting policy following cessation of loan relationship

Section 318 deals with how to handle differences in outstanding amounts relating to a loan relationship when a company has ceased to be a party to that relationship and there has been a change of accounting policy between periods.

• When a company ceases to be a party to a loan relationship and a change of accounting policy creates a difference in the outstanding amount between the end of one period and the start of the next, a corresponding credit or debit must be brought into account
• The outstanding amount comprises any deferred income or deferred loss from the loan relationship not yet brought into account, plus any amounts recognised as other comprehensive income that have not been transferred to profit or loss
• The section assumes the same accounting policy was applied in previous periods unless the company's accounts are legitimately drawn up under a different assumption in accordance with generally accepted accounting practice
• No adjustment is required to the extent that the credit or debit would already be brought into account under other provisions