Temporary differences

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Corporation Tax

Guidance

Calculation of temporary differences

The temporary difference arising in respect of an asset or liability is calculated by comparing the carrying value of that asset or liability with its tax base.

IAS 12 uses the concept of taxable or deductible temporary differences. Whether a temporary difference is taxable or deductible can be calculated as follows:

Assets	Carrying value* minus tax base	If result is: Positive = Taxable temporary difference Negative = Deductible temporary difference
Liabilities	Tax base minus carrying value*

IAS 12, paras 15–33

Taxable temporary differences give rise to deferred tax liabilities. The deferred tax liability equals the taxable temporary difference multiplied by the appropriate tax rate.

Deductible temporary differences give rise to deferred tax assets. The deferred tax asset equals the deductible temporary difference multiplied by the appropriate tax rate.

* In the context of consolidated accounts, it is important to note that the carrying value used in the above calculations is that in the consolidated rather than individual company accounts.

Tax rate to apply

The tax rate applicable for these calculations

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Malcolm Greenbaum

Director and Principal Trainer at Greenbaum Training and Consultancy Limited

Malcolm is a UK Chartered Accountant and Chartered Tax Advisor winning the John Wood Medal in the November 1995 CIOT sitting for the best paper on business taxation.He was previously Director of Finance and Taxation Programmes at BPP Professional Education and has delivered IFRS, US GAAP, UK Tax and VAT training (at all levels from an introduction to the complexities of IAS 39) to a multitude of organisations world-wide since 1992.Malcolm has particular experience in delivering bespoke training programmes to multi-nationals in the financial services, transport and energy sectors as well as delivering UK tax and VAT update programmes to accounting and law firms.He is passionate about training and his enthusiasm ensures that the participants enjoy the learning experience whilst gaining knowledge through their engagement in the sessions and through encouraging them to ask questions and discuss practical issues they may have.Malcolm also provides consultancy services to companies and accounting firms, including provision of VAT advice, reviewing accounting policy manuals and advising on accounting treatments of various transactions.In his spare time, Malcolm enjoys flying having gained a Private Pilot's Licence in 2014.

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