FRS 19 Deferred Tax

 Hello,  

I am preparing a 5 year business plan for a start up which is forecast to make substantial losses for the first two years, circa 1m in total.  In year three the business is expected to make a small profit, rising to £5m in year 5.  I understand under FRS 19 full provision should be made.  As the business will obviously roll the loss relief onto future periods, I considered building in a deferred tax debtor into the balance sheet and crediting the corporation tax in the P&L for the first loss making years and then reversing as the business gets relief,  however I dont think I should do that, given the deferred tax is coming from trading losses in a high risk start up, it would be misleading in my opinion to show a deferred tax asset which may not be recovered if the business failed?  Sorry if this is a stupid question, just not something I have had to consider before, any comments would be appreciated

 

Thanks

 

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In short...maybe.

holywood |

It is only a plan

Euan MacLennan |
Euan MacLennan's picture