Accounting and Tax Changes to a Company Owned Investment Bond

Dawny

A client of mine is a director of a micro entity, end of year is 31st March, and the company holds an insurance bond.

I understand that I can prepare micro accounts, FRS 105, and show the insurance bond as historical cost and that the full gain (hopefully) would be taxed when the bond is surrendered.

However I'm wondering if I should prepare the accounts under FRS102 and show the bond at fair values. I have been advised that as the accounting basis is changing, I could spread the tax payable on the resulting gain over ten years but I cannot find any documentation confirming that this is allowable.

Also, would I then have to show the deferred tax in the accounts?

Thanking any help in advance.

CeeJaySix

Generally, movements in fair value of financial instruments are allowable for CT, yes. Make sure you correctly classify the bond and you have sufficient information to ascertain the fair value though.

Yes FRS102 is hot on deferred tax...but if you're paying the tax on the movement in FV will there be any?

A lot more disclosures under FRS102 though, will your client be happy to put it all in? And unless the bond has been taken out in this period you will need to restate your comparative year and the opening position at the date of transition, both for the FV of the bond and the deferred tax thereon.

Dawny

Thank you.