The following Corporation Tax guidance note 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:
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.
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