BIM46545 | Specific deductions: provisions: examples of allowable provisions

Examples of provisions which will generally be allowable to the extent that they are sufficiently accurate and accord with GAAP include those made:

• in the period of sale for the cost of work under a warranty which a trader gives on the sale of merchandise (or under consumer protection legislation),

• for commission refundable by an insurance intermediary on the lapse of a policy where the commission is recognised as income at the inception of the policy,

• by builders for rectification work, including retentions up to the level that these have been recognised as income within accounts,

• for future maintenance of plant and machinery made in circumstances that appear indistinguishable from those in Johnson v Britannia Airways Ltd [1994] 67TC99 (such provisions are however outlawed by Section 21 of FRS102 for assets owned by the business).