Deferred tax and Corporation Tax
Real life example:
Solution - unrecognised deferred tax asset?
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Next - ABC anticipates gross losses for the next 3 years (2024-2026) of about GBP 1 million
- for 2027 and 2028 the projected gross profit is GBP 0.3 million annually as at 31.12.2023 a deferred income tax asset was recognised of TGBP 380 on the tax losses for 2021 and 2022
Solution - unrecognised deferred tax asset?
- There is a major uncertainty of realisation of the deferred income tax asset and derecognition is required in respect of the uncertain amount. Two options are available:
- Option 1: provision of 100% of the asset due to high uncertainty => unrecognised amount of TGBP 380
- Option 2: if the profit for 2023 and 2024 is probable, it is reasonable to make an adjustment of the unrecognised deferred tax assset => TGBP 300 x 2 x 24% = TGBP 144 => unrecognised amount of TGBP 236 (380 - 144)
