What is the going concern basis in accounting?
Answered 17 March 2026
The sources retrieved are primarily First-tier Tribunal (FTT) case law decisions and HMRC guidance relating to R&D tax credits. While they contain useful descriptions of the going concern basis drawn from accounting standards (IAS 1 and ISA 570), they do not constitute primary accounting legislation or HMRC tax guidance on the going concern concept itself. Here is what can be said based strictly on those sources:
What the accounting standards say (as cited in case law)
The going concern basis is the default basis on which financial statements must be prepared. Under IAS 1, para 24:
"An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or cease trading, or has no realistic alternative but to do so."
When preparing financial statements on this basis, management must assess the entity's ability to continue as a going concern. If there are material uncertainties that cast significant doubt on that ability, those must be disclosed. If the going concern basis is not used, the entity must disclose that fact, the basis actually used, and the reason.
The assessment must take into account all available information about the future, covering at least (but not limited to) twelve months from the end of the reporting period.
UK financial reporting frameworks (including UK GAAP) similarly require adoption of the going concern basis except where management intends to liquidate the entity or cease trading, or has no realistic alternative to doing so. An entity that does not meet the threshold for that exception is described as "a going concern".
Under company law, directors are responsible for assessing going concern status and deciding whether to use the going concern basis of accounting. Auditing standards (such as ISA 570) do not determine that responsibility — it rests with the directors.
HMRC guidance / practice
For R&D tax relief purposes, HMRC defines a going concern company specifically: a company is a going concern if its latest published accounts were prepared on a going concern basis, and nothing in those accounts suggests that status depends on receiving R&D relief or tax credits.
A company in administration or liquidation cannot make a claim to R&D relief.
Note: The going concern basis is fundamentally an accounting concept governed by IAS 1, UK GAAP (FRS 102/FRS 101), and company law (CA 2006), rather than by tax legislation directly. The sources available here address it primarily in the context of R&D tax relief eligibility. For a fuller treatment of the accounting concept itself, you may wish to consult the FRC's guidance or the relevant accounting standards directly.
Citation sources
r view may be prepared and approved by the directors in line with their responsibilities under CA 2006. 105. International Accounting Standard 1 (“IAS 1”) is entitled “Presentation of Financial Statements”. It begins by setting out its objective as follows: “This Standard prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity’s financialstatements of previous periods and with the financial statements of other entities. It sets o
levant factors the directors had decided to cease trading. The Tribunal’s view 116. We agreed with Mr Priestley for the reasons he gave. We find as a fact that drawing up the accounts on a non-going concern basis was not a breach of the relevant accounting standards. The auditing standards 117. We first make findings of fact about the relevant auditing standards, based on Mr Parkin’s evidence and the documents in the Accountancy Bundle. We then consider both parties’ submissions. Findings of fac
cern basis throughout 2017 and 2018. (2) Although ISA 570 was only required to take effect for accounting periods which began after 15 December 2019, earlier adoption was permitted. (3) The revised ISA 570 was available in March 2019, before KPMG signed the audit report for the 2017 financial statements. KPMG should have taken the new approach into account, and had they done so, the Appellant would not have filed the 2017 accounts on a not-going concern basis. (4) The revised ISA 570 had been pu