Trying to understand "idea" of FRS-102 "29.4"

Has a company rights in certain cases to get back CIT paid in previous period?

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Trying to understand UK accounting/taxes. I work as accountant in Latvia and FRS-102 29.4 seems completely different from Latvian rules. So can not understand.

FRS-102 "29.4 An entity shall recognise a current tax asset for the benefit of a tax loss that can be carried back to recover tax paid in a previous period."

Words "for the benefit of a tax loss" what does it mean? Tax loss is "current's year loss multiplied by tax rate"? And tax paid in a previous period, if amount of paid tax <= "current's year loss multiplied by tax rate" i record in assets? And corresponding account is some income account? 

For example in previous year company got profit and payable CIT (corporate income tax) was £15,000.

This year company gets "taxable" loss £100,000, so "payable" tax seems -£20,000 (-£100,000*20%).

So does the company has rights to record £15,000 in assets in current annual report? And to get these £15,000 back from government? Or FRS-102 29.4 is about some other situation? 

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By paul.benny
01st Feb 2024 07:37

Your analysis is correct.

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By I'msorryIhaven'taclue
01st Feb 2024 08:58

I'm not sure about the algebra in:

"This year company gets "taxable" loss £100,000, so "payable" tax seems -£20,000 (-£100,000*20%)."

But if the end result in your current loss-making year is a £15,000 asset (debit) to the balance sheet and a -£15,000 negative charge for corporation tax (credit) at the bottom of your P&L then I'll award you two good house points and ignore your workings ;)

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By Ruddles
01st Feb 2024 11:53

To go a little further - the remaining tax value of the loss - £5k - might possibly be recognisable as a deferred tax asset, depending on circumstances. Probably not, but possibly.

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