The following Corporation Tax guidance note by Tolley in association with Malcolm Greenbaum provides comprehensive and up to date tax information covering:
FRS 102 , s 29 sets out the recognition, measurement, presentation and disclosure requirements for both current and deferred tax. The section also includes accounting requirements for VAT and similar taxes which are not based on income, although the focus of this guidance note is direct taxes.
The treatment of current tax under FRS 102 is unchanged from old UK GAAP (ie FRS 16 which was withdrawn for accounting periods beginning on or after 1 January 2015).
Deferred tax retains the ‘timing difference’ concept from FRS 15 under old UK GAAP, but its application is extended from profit before tax to ‘comprehensive income’, which includes profit before tax plus other gains and losses recognised outside the income statement.
Another key difference is that deferred tax must also now be recognised on fair value adjustments arising out of a business combination (where the acquirer obtains control of another business). See the FRS 102 ― specific deferred tax issues guidance note for further information.
A company must recognise a current tax liability in its financial statements for tax payable on taxable profit (ie corporation tax) for the current and past periods. If the tax paid for those periods exceeds the amount payable, the excess amount paid is shown as a current tax asset, as the overpayment gives rise to a repayment from HMRC. Alternatively, a reallocation to another accounting period could be agreed between the company and HMRC.
If a company has a tax loss that can be carried back to recover tax paid in an earlier period, a current tax asset is recognised for the benefit of that tax loss (ie the repayment due from HMRC).
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