Generally accepted accounting practice required a company to adopt an accruals basis of accounting and on that basis its appeal was struck out, as it had no reasonable prospect of success. 

The appellant company commenced trading on 1 March 2012. In 2015, another company (HSIL) was incorporated, which provided a number of services to the appellant including the provision of construction services. The companies were established to redevelop buildings on a site in Henley-on-Thames, which included ‘House 3’ and ‘House 4’. HSIL secured bank financing and engaged contractors to carry out the redevelopment. 

The appellant sold House 4 in the accounting period ended on 28 February 2018. In its accounts and tax return for that period, it offset, against the sale proceeds, not merely the costs of developing House 4, but also the costs to date of redeveloping House 3. The appellant adopted financial reporting standard (FRS) 102