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Deferred tax on fixed assets

A Limited UK company has in 2017 a listed shares portfolio worth £100,000 accounted as fixed assets. At the end of the accounting year the fair value (not realised) is £120,000 with a gain of £20,000, so I account realised gain in the income statement of £20,000 which added to the dividend income of £5000 makes total profit of £25000 before tax. I then account for deferred tax (20% ) of £4000. So profit after tax in the income statement is £21000 minus of course CT. The following year 2018 the company sells £10000 worth of shares at cost and the portfolio value goes down to £75,000, I will therefore have an unrealised loss of £15,000 and my deferred tax (20%) will be £3000 (15K x 20% - asset)     OR      £3000 - £4000 brought forward = £1000?  

The deffered tax is calculated on the actual liability of the specific year or can it be accounted in the previous years and then brought forward?

 

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16th May 2018 18:16

[I’m assuming that you’re preparing under FRS102s1A.]

At YE 2018 you have £90k worth of shares valued at £75k, so an unrealised loss of £15k, as you say. DT is calculated on this c/f figure.

Given the loss, there’s no deferred tax liability, but rather a deferred tax asset of £[email protected]%=£2,850.

You’ll have a DT credit to the P&L of £6,850 and a fair value loss on investments of £35k (movement from +£20k to -£15k), which can either be shown in the P&L or a separate Reserves heading.

EDIT:
[Given that last year you asked us under which regime you should be preparing and about 1k people have seen the thread but decided not to answer, I think it’s probably time to do some research, or -god forbid - pay for some advice]

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to atleastisoundknowledgable...
16th May 2018 18:22

atleastisoundknowledgable... wrote:

[Given that last year you asked us under which regime you should be preparing and about 1k people have seen the thread but decided not to answer, I think it’s probably time to do some research, or -god forbid - pay for some advice]

If he's managed to lose that amount in a rising market, I think some investment advice might also be helpful.

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By mcecazo
to Accountant A
16th May 2018 18:54

Thank you for your reply. It was just an example.

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By Matrix
to atleastisoundknowledgable...
16th May 2018 18:47

If the company is trading in shares then shouldn't the portfolio be marked to market anyway?

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By mcecazo
to Matrix
16th May 2018 20:08

thank you.

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By Matrix
16th May 2018 18:20

Why are you using 20% and why aren't you calculating corporation tax on the £25k?

If you are going it alone then deferred tax is the least of your worries.

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By mcecazo
to Matrix
16th May 2018 18:51

Thank you, of course I have calculated CT, I was making simpler. 20% is also to make it simpler.

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By Matrix
to mcecazo
16th May 2018 19:19

If you have calculated CT then your profits after tax are not £21k.

How have you got comfortable that the company isn't trading?

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