§ Mr. GibbTo ask the Chancellor of the Exchequer with regard to the taxation of companies, what his policy is on the accounting treatment of provisions in company accounts and its effect on capital allowances; and if he will make a statement. [95920]
§ Dawn PrimaroloA provision made in the accounts of a company carrying on a trade will be allowable for tax purposes if
the provision is in respect of allowable revenue expenditurethe making of the provision accords with UK generally accepted accounting practicethe timing of the expenditure in question is not affected by any specific tax rulethe provision is sufficiently accurate.Capital allowances, by contrast, give relief for capital expenditure. The tax treatment of provisions, which, as the hon. Member will know, is affected by recent judicial decisions, therefore has no effect on the availability of capital allowances. The Inland Revenue continues to monitor developments in the law in this area.