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Deferred Tax - Previous Accountant Issue

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I have a client who has a deferred tax credit balance on the balance sheet of £4,226. This is the first year we have prepared accounts for them and the previous accountant was very unhelpful with the information we receieved. I have tried to re-do the deferred tax calcualtion based on previous years accounts and I can not get the same figure they did. 

How would I treat this in the accounts this year? There is no deferred tax this year. 

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By Wanderer
13th Jul 2020 12:15

£4,226? FRS102 1A I presume? Just adjust it via the tax charge in the P&L.

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By paul.benny
13th Jul 2020 12:19

To recalculate the prior year deferred tax balance, you would probably also need the tax comp - or least the tax-based value of the items giving rise to DT.

Are you sure there's no deferred tax this period end?

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By johnt27
13th Jul 2020 12:41

When you say there's no deferred tax this year. Do you mean no balance or no charge?

Depending on the year end, and assuming it was done right(!) the deferred tax from the previous year may have been calculated at 17% which would no longer be correct given the reversal of the intended drop in CT rates

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RLI
By lionofludesch
13th Jul 2020 12:44

Just work out what it should be and make the adjustment in the current year.

No need to be considering previous years' accounts.

Move on.

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Replying to lionofludesch:
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By Paul Crowley
13th Jul 2020 14:04

Agree
fictional liability invented by accountants.
Just get the Balance sheet correct this year.

Thanks (2)
By johngroganjga
13th Jul 2020 12:45

As Paul says, to re-perform last year's calculation, you need not only the accounts but also the CT computation, or at least the capital allowances part of it.

Even that might not be enough if there is something else going on - like some of the fixed assets in the accounts not having had capital allowances claimed on them.

Has the previous accountant really refused to provide their calculation?

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By ireallyshouldknowthisbut
13th Jul 2020 12:57

Dr Deferred tax 4226
Cr CT in P&L 4,226

Would be the standard approach.

Assuming the current balance sheet value is really nil.

ive just taken on a client with 5 bank accounts only 1 of which agrees to last years balances, the VAT balance is wildly inaccurate and unreconciled, there is a "suspense" account of £5k and the whole thing stinks to high heaven. [it looks like they just booked what fell out of the accounting software, albeit even that does not agree] however I will just be getting this year's balance sheet right and not trying to work out quite how they got it all so badly wrong. I have a "last year fuckuppery up" account in the low thousands which will get written off, albeit not in the tax comp.

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Replying to ireallyshouldknowthisbut:
Hallerud at Easter
By DJKL
13th Jul 2020 13:06

And if it ends up with a CR balance what then re tax?

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By Calculatorboy
13th Jul 2020 13:19

Just pay tax on it , he said low 000's so not going to be major issue

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By ireallyshouldknowthisbut
13th Jul 2020 15:10

Well its not going to in this case, but if it did I'd probably not put an adjustment in the tax comp for it.

My halo is looking good today. Although it might be slipping if a chunk of my difference is VAT not paid over. I am looking at that right now as it happens and trying to see if there are systematic errors in the prior 12 months of returns which explain the 'why'. No company car. No flat rate. Nothing obvious. Just a monkey with Quickbooks hammering the buttons with their fists from what I can work out and saying "its sent it must be right" to the client. They are the hardest ones to figure out. I don't mind a bookkeeper who is consistently inconsistent as you can find and fix the issues, this one is more scattershot.

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Replying to ireallyshouldknowthisbut:
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By Mr_awol
14th Jul 2020 15:28

Quote:

Dr Deferred tax 4226
Cr CT in P&L 4,226

Would be the standard approach.

Assuming the current balance sheet value is really nil.

ive just taken on a client with 5 bank accounts only 1 of which agrees to last years balances, the VAT balance is wildly inaccurate and unreconciled, there is a "suspense" account of £5k and the whole thing stinks to high heaven. [it looks like they just booked what fell out of the accounting software, albeit even that does not agree] however I will just be getting this year's balance sheet right and not trying to work out quite how they got it all so badly wrong. I have a "last year fuckuppery up" account in the low thousands which will get written off, albeit not in the tax comp.

I agree.

I also share your pain on the new client front. I recently took one from a firm out of my normal area (thankfully) and the BS was all over the place. When I asked what the £8k in other creditors was, and several other queries about BS items all I got back was 'per bookkeeper's TB' for all of them. It's like they sucked it into their software, pressed print, and charged £1400 for the resulting mess.

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By RaxJ
14th Jul 2020 14:28

So a deferred tax credit balance indicates a deferred tax liability. Do you have access to the fixed asset register (if there are any), nominal ledger? See if any double entry was made last year. Have you got a copy of last year's tax computation? You should have these documents as part of professional clearance? I wouldn't reverse the credit balance out just yet, as you may need to reduce the deferred tax this year. How have you determined that there is no deferred tax this year? If there is a loss for example, you may need to consider a deferred tax asset. You need the backing documents as a starting point.

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