On trading income principles as understood in 1996, transfers to or from an equalisation reserve would not affect taxable profits, following the rule that neither a profit nor a loss could be anticipated. For later developments in this area see BIM31100. Further, transfers were not based on any reliable calculations of the related losses (see Owen v Southern Railway of Peru 37TC602). Finally, it could be argued that additions to reserves were simply an application of profit, so that profits could not be said to be misstated in the absence of a deduction. For all these reasons, there was no relief.

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