UK: Can 'accounts' be 'accounts' if they are not reliable?

The First-tier Tribunal (Tax Chamber) decision Grint v HMRC [2016] UKFTT 537 (TC) has attracted much attention because of the identity of the taxpayer. The decision is noteworthy for other reasons, not least the discussion of what is meant by the term 'accounts'. The issue arose in a dispute concerning the effectiveness of a change in accounting date. The relevant legislation defined 'period of account' and 'accounting date', concepts that referred to 'accounts' but no definition of 'accounts' was provided: see section 217 of the Income Tax (Trading and Other Income) Act 2005 and section 989 of the Income Tax Act 2007.

The Tribunal held that 'accounts' for the purposes of section 217 referred to the company's general purpose trading accounts and did not include accounts drawn up solely for tax purposes. The Tribunal also rejected the argument advanced by HMRC that 'accounts' could not be regarded as such if they were wrong or unreliable. The Tribunal concluded, on the basis of expert evidence, that accounts (as understood by accountants): (a) must relate to an entity; (b) must be considered by, and intended by, the entity to be its accounts, by some kind of approval or adoption or otherwise; and (c) must represent (however accurately or otherwise) its past transactions over a set period of time.