Generally accepted accounting principles (GAAP) meaning

FORTHCOMING CHANGE relating to the treatment of forex under UK transfer pricing rules: From 1 January 2026, the Finance Bill 2026 introduces a series of updates to the UK transfer pricing framework. Among the measures are changes that bring foreign exchange gains and losses arising on loan relationships and derivative contracts within the main transfer pricing rules, while leaving the tax rules for forex hedging untouched. Previously, such amounts were adjusted under bespoke provisions in the loan relationships and derivatives regimes addressing non‑arm’s length transactions. The changes also broaden the existing loan relationships anti‑avoidance rule in CTA 2009, s 452, to accommodate a new election allowing companies to be treated as guarantors of a non‑arm’s length borrowing for transfer pricing purposes. For further detail, refer to News Analysis: Budget 2025—Tax analysis—International and Tax—publication of Finance Bill 2026. Numerous entries in a company’s corporation tax return will be tax‑adjusted figures sourced from accounts prepared in line with generally accepted accounting practice (GAAP)—either UK GAAP or international accounting standards (IAS). In...

Under Part 8 of the Corporation Tax Act 2009 (CTA 2009), the overarching position within the corporate intangible assets regime is that a company’s gains and losses on intangible fixed assets (IFAs) are determined and recognised as corporation tax credits and debits in accordance with the accounting treatment of those IFAs. Put simply, the company’s accounts, drawn up under generally accepted accounting practice (GAAP), form the starting point for establishing the taxable and relievable amounts relating to the company’s IFAs. This is commonly described as ‘tax following the accounts’. Nonetheless, there are a number of departures from this rule, where the corporate intangible assets legislation overrides the accounts and stipulates that IFA credits and debits must be worked out on an alternative basis. For broader guidance on the taxation of IFAs, see Practice Note: How intangible fixed assets are taxed—basic principles. A notable situation where the tax rules may move away from reliance on the company’s accounting results is where an IFA is moved between entities within the same group...

Under Part 8 of the Corporation Tax Act 2009 (CTA 2009), the starting point for the corporate intangible assets regime is that a company measures gains and losses on its intangible fixed assets (IFAs) as corporation tax credits and debits, for corporation tax purposes, by reference to the way those IFAs are accounted for. Put simply, accounts drawn up in line with generally accepted accounting practice (GAAP) provide the basis from which the figures and categories that become taxable or relievable in relation to a company’s IFAs are determined. This approach is commonly known as ‘tax following the accounts’. That said, the regime contains a number of carve-outs: on certain matters the rules override the accounting outcome and mandate that IFA credits and debits are worked out using an alternative method instead, calculated on a different basis overall. For more on the tax treatment of IFAs generally, see Practice Note: How intangible fixed assets are taxed—basic principles...