1.4 If a charge for deferred taxation is included in the accounts, the profit and loss accounts appear as follows:
Year
1
2
3
4
8
Profit per accounts
2,000
2,000
2,000
2,000
2,000
Corporate tax charge
210 210 ___ 420
294 116 ___ 420
361
415
542
Deferred tax charge / (credit)
49
5
(122)
___ 420
___ 420
___ 420
Total tax charge
Profit after tax
1,580
1,580
1,580
1,580
1,580
Effective rate of tax
21%
21%
21%
21%
21%
1.5 There are a range of timing adjustments apart from the differences between depreciation and capital allowances. It is the province of deferred tax to deal with such timing differences. 1.6 In chapter 2, dealing with corporation tax, we used the example of Hauleigh Horsegear Limited: you will recall that we separated the adjustments in the tax computations between those which were absolute, as they increased the effective overall rate of tax, and those which were timing, as they had the effect of moving the profits into different periods for tax purposes.
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