The following Corporation Tax guidance note Produced by Tolley in association with Malcolm Greenbaum provides comprehensive and up to date tax information covering:
Transitioning from IFRS to FRS 102 will be rare, although two examples of this scenario are provided below:
it is possible that a company currently listed on an EU regulated stock exchange or the UK's Alternative Investment Market (AIM) might delist and may not need to produce IFRS financial statements in future
a subsidiary currently producing IFRS financial statements as directed by its parent may be sold by the parent company to shareholders or another group that is not using IFRS whereby it may need to transition to FRS 102
The rate of tax used for any deferred tax calculations on transition to FRS 102 is the rate expected to apply when the timing difference reverses, based on the rates enacted or substantively enacted at the end of the relevant year. See the FRS 102 ― current and deferred tax guidance note for a definition of when a rate is substantively enacted.
IFRS (IAS 12) calculates deferred taxation based on temporary differences between the book value of an asset or liability and its tax base. The tax base of an asset is the amount that will be deductible against future taxable profits. The tax base of a liability is the book value minus the amount deductible against future taxable profits.
IAS 12 mandates that the tax base be calculated by taking into account the manner of recovery of the asset or liability. Most assets have a ‘dual tax base’, ie the asset is held for ‘use’ during its useful economic life and then a ‘sale’ basis at the point of sale, loss or destruction of the asset. This can cause particular problems for assets which do not qualify for capital allowances such as land and buildings.
See the IFRS introduction, Tax base, and Temporary differences guidance notes for further information.
IAS 12 also contains an initial recognition exception or IRE for short. This provides an exemption from recognising deferred tax on the
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The substantial shareholding exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. Conversely, if losses are generated by the disposal and the SSE conditions are
The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are
Expenditure of a capital nature is not allowed as a deduction when calculating trading profits. Expenditure of a revenue nature is allowable, provided there is no specific statutory rule prohibiting a deduction and the expenditure also satisfies the wholly and exclusively test. See the Wholly and
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.