Help with Deferred Tax and the CT600

browny76

Hi everyone,
I inherited a client from an Accountant who seemed quite glad to be shot of them. There was deferred Corp Tax in the last accounts they submitted (March 2014) but no information given during the hand over, or since.

I am using HMRCs CT600 tool at the moment, and the tax figures match the tax payable for the accounts created to 2015 once completed. The area I am a bit stuck on is....

..to get rid of the deferred tax from the prior period I passed journals to move the deferred tax figure back into the Corp Tax payable. This has increased the corporation tax bill in the accounts, but the CT600 for the period shows a lesser amount as I cant seem to find where on the CT600 I would add the prior periods deferred tax figure. Is it possible to do this on the CT600? I've scanned it thoroughly and cant seem to add a tax adjustment to increase the payable amount for the current period to include the deferred tax from 2014.

Any help would be gratefully received.

Thank you in advance, Mark

MarieNoelle

Deferred tax is carried forward into the next year and then increased or decreased by a deferred tax charge. Why do you want to "get rid" of it?
Incidentally if you are in the micro entity regime you do not have to account for deferred tax so it can be written off in the P&L.

browny76

Hi Marie,
I inherited a Credit balance of £1556 deferred Tax. Due to relationship breakdown between the former accountant and client, I've received little information.
The deferred Tax could sit in the accounts forever more, but I thought it would be cleaner to remove the figure (as I have no information surrounding the amount deferred). Was it incorrect to pass journals from deferred Tax into Corp Tax payable? At this stage it wouldn't be too late to reverse the process.

Thanks

burg

Yes that is incorrect. Without teaching you to suck eggs Deferred Tax is recognition of potential tax due in later years due to timing differences usually as caused by capital allowances and tax losses.

Under the new micro entities regime deferred tax is not required so you may remove it or if using FRSSE then account for it in the current year and make the necessary adjustment. the adjustment should always be one entry in the BS and one in the P&L. Both of your entries are in the BS.

Please note this is not an actual tax it is a recognition of potential future tax.

If using micro entity regime the debit deferred tax movement in the BS and then credit the deferred tax in the P&L. No you have no deferred tax.

If using FRSSE then you need to perform a calc for deferred tax. Compare the NBV of assets in the accounts to the Tax WDV and work out the tax on the difference. This is only on qualifying assets. Then also account for any tax losses to carry forward but only if future profits are likely to be realised against these profits. Calculate the tax here.

Combine the two figures and then adjust for the difference from last years deferred tax figure.

browny76

Thank you for your very detailed answer. Very helpful.

I am aware of deferred tax but by reading your reply my aching brain now sees the obvious lunacy of my approach to the transaction. Its been a long day, and I'm thankful for fellow AAT members stepping in to help, and pointing out an area in need development on my part.

Kind Regards,
Mark