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It is normal accountancy practice to deduct a sum in the profit and loss account for liabilities which have actually accrued during the accounting period. Such deductions will usually be allowed in computing the taxable profit of that period¹.

In some circumstances, a deduction may also be made for a liability which has not yet accrued but for which there is a reasonable expectation that it will arise in the future, known as a provision. The tax treatment of such a deduction will depend on the facts of a particular case, the nature of the business concerned and, particularly, the degree of contingency.

Where the provision relates to specific expenditure which has already accrued and the amount of the provision can be calculated with a reasonable degree of accuracy, it is known as a 'specific provision'. Specific provisions will usually be allowed for tax purposes, provided the following conditions are satisfied:

1. Ìý

   •ÌýÌýÌýÌý it relates to allowable revenue expenditure, rather than capital expenditure

2. Ìý

   •ÌýÌýÌýÌý it is calculated in accordance with GAAP²