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Deferred Tax Fixed assets

Deferred Tax Fixed assets

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I always find that calculating deferred tax on fixed assets are the most painful exercise:

Do people take a P&L approach or a balance sheet approach?

I use balance sheet approach. In this case I compare carrying value to tax base (capital allowance value).

However  in recent years some additions have been none qualifying. So I need to go back and find out which additions were none qualifying and deduct them from the carrying value.

Do anyone have a link to an excel template which can calculate deferred tax for fixed assets including considering:

Special rate pool, IFRS16 Leasing (including equity movement on transition accounting), Capitalised revenue expenditure, Rate changes etc.

I cant explain how painful calculating deferred tax on fixed assets are!

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By johngroganjga
15th Jan 2021 14:14

I am not sure why it’s painful. It’s just what we accountants do. As you say, it’s tax on the difference between the accounting book value of the fixed assets on which capital allowances have been claimed and the tax written down value of those assets.

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By accountingdude
15th Jan 2021 14:17

ok noted

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By accountingdude
15th Jan 2021 14:32

Have capital allowances been claimed on leased assets (Accounted for under IFRS16) . In our case depreciation is claimed allowable under SP3/91. So suppose there will be no deferred tax on leasing. However, there was an adoption of IFRS16, where an adjustment was posted to equity. We recognize historically deferred tax on this item.

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By Paul Crowley
15th Jan 2021 14:30

If this is a problem
consider either Micro accounts or whether you are in the correct field

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By paul.benny
15th Jan 2021 14:58

I don't think IFRS16 and micro accounts are compatible.

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By paul.benny
15th Jan 2021 14:44

Always balance sheet approach - P&L deferred tax charge or credit is merely the difference between opening and closing DT.

It makes no difference that writing down allowances varies between asset classes.

Your IFRS16 calculations will give you prepayment or accrual (being the difference between lease rentals paid and the amortisation of the right-of-use asset + implied interest). On the basis that t in the tax comp, leases continue to the accounted for as operating leases, the DT balance is the CT rate x accrual/prepayment.

AFAIK, transitional adjustments are not allowable for CT.

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By accountingdude
15th Jan 2021 14:50

Many thanks!

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