Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd; Small (Inspector of Taxes) v Mars UK Ltd [2007] UKHL 15, [2007] 2 All ER 440
Where the depreciation in fixed assets which related to the production of goods sold during the year or in assets which were not used for production has been deducted from revenue in the profit and loss account, s 74(1)(f) of the Income and Corporation Taxes Act 1988 does not require that, in computing profits for tax purposes, the depreciation in fixed assets which relate to the production of unsold stocks carried forward as part of the cost of unsold stocks should be added back.
The relevant accounting standard lays down a general requirement that the year’s depreciation shown in the balance sheet should be deducted in that year’s profit and loss account but makes an exception whereby it is permissible to carry forward an appropriate part of the depreciation as part of the cost of stocks, to be deducted as and when the stocks are sold in a future year.
