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Current tax assets under FRS105

Current tax assets under FRS105

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Would I be correct to understand from section 24.5 of FRS105 that a current tax assets can only be recognised in FRS105 accounts in respect of tax losses carried back against an earlier year's profit and cannot be recognised in respect of losses carried forward, even where it is know that the following year is profitable and will lead to a a tax charge ? 

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By Paul Crowley
17th Aug 2021 20:52

I would never recognise a future tax relief as described
But in real life only the Accounting bodies care about this sort of stuff.
There is noone to challenge it unless company becomes insolvent
Then every lender will look to pass their lending errors on to someone who has PII

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By Paul Crowley
17th Aug 2021 21:18

If client needs the profit to validate dividends then just change the depreciation policy

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By paul.benny
18th Aug 2021 07:58

Correct.

At the balance sheet date, you're carrying forward the tax losses to use against *future* liabilities. That offset is, in effect, a post-balance sheet event, and you only adjust for PBSE that provide evidence of conditions existing at the balance sheet date.

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By Bobbo
18th Aug 2021 08:37

Carrying losses back is a current tax asset because the asset you are recognising is an actual refund of corporation tax to be received.

Carrying losses forward is a deferred tax asset as what you are recognising is a temporary timing difference between the accounts position and the tax position.

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Replying to Bobbo:
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By L Haldane
18th Aug 2021 09:06

Thanks Bobbo, that makes perfect sense.

As deferred tax is not recoginised under FRS105 you have explained precisely why section 24.5 of FRS105 refers only to current tax assets for losses carried back and not for losses carried forward.

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