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Deferred taxation note (FRS 102 Section 1A)

Analyse the deferred tax provision or asset into revaluations, tax losses and other timing differences.

Deferred tax recognises tax that will fall due, or be recovered, in later years because some income and expenses are taxed in a different period from the one in which they appear in the accounts. For most small companies it arises because capital allowances are claimed faster than the assets are depreciated. A deferred tax liability sits on the balance sheet under Provisions for liabilities.

What this note shows

An analysis of the closing deferred tax balance by cause, for this year and last year:

Editor rowPrinted asTypical cause
Revaluation of land and buildingsRevaluation of land and buildingsProperty carried at a revalued amount above its tax cost
Revaluation of investment propertyRevaluation of investment propertyFair value gains on investment property
Tax losses carried forwardTax losses carried forwardUnused trading losses expected to reduce future tax (an asset)
Other deferred taxOther timing differencesAccelerated capital allowances and other short-term differences

Note that the fourth row is labelled Other deferred tax in the editor but prints as Other timing differences.

FRS 102 Section 1A does not list a separate deferred tax note among the disclosures small companies must give, but it is commonly included to explain the provisions figure on the balance sheet. The note is not available in FRS 105 accounts, because micro-entities do not account for deferred tax.

Where the figures come from

The four rows are typed in; they are not read from the trial balance. Your deferred tax calculation (or your accountant's) gives the closing balance split by cause. The total you enter should agree to the deferred tax figure in the balance sheet, which does come from the trial balance, and the movement in the year should agree to the deferred tax charge shown in the taxation note.

In the demo, the deferred tax provision is £6,200 (2025: £5,000), all from other timing differences; the £1,200 increase is the deferred tax charge in the profit and loss account.

Completing the note in Tax Optimiser

Open the period, choose View Accounts, then Notes in the left Actions menu. Under Deferred taxation, select Deferred taxation.

  1. Set Show this note in the accounts to Yes.
  2. Enter each component under Current Year and Last Year. Enter a liability as a positive figure and an asset (for example tax losses) as a negative figure.
  3. Check the green Total row against the balance sheet.
  4. Click Save changes to save the note and rebuild the accounts preview.
Deferred taxation note editor with rows Revaluation of land and buildings, Revaluation of investment property and Tax losses carried forward all 0.00, Other deferred tax 6,200.00 (last year 5,000.00), and Total 6,200.00 and 5,000.00

If the company has a deferred tax asset it has decided not to recognise – usually unused losses where future profits are uncertain – explain that in Additional note for Deferred taxation.

Wording templates

On the Additional note for Deferred taxation section:

  • Unrecognised deferred tax asset – explains that a deferred tax asset for tax losses carried forward has not been recognised because suitable future taxable profits are not probable. You are asked for {{Amount}}.

How it appears in the accounts

The note opens with "The provision for deferred taxation is made up as follows:" when the total is a liability, or "The deferred tax asset is made up as follows:" when it is negative. Rows with a figure in either year print, followed by the total with a double underline.

Printed note 14 Deferred taxation reading The provision for deferred taxation is made up as follows, with Other timing differences 6,200 (prior year 5,000) and total 6,200 and 5,000

Frequently asked questions

What is deferred tax in small company accounts?

It is tax expected to become payable or recoverable in future because of timing differences between the accounts and the tax computation. The most common example is capital allowances being claimed faster than depreciation is charged.

Does Tax Optimiser calculate deferred tax for me?

No. The note figures are typed in from your own deferred tax calculation. Post the balance and the year's charge in the trial balance, then enter the analysis here.

How do I show a deferred tax asset?

Enter it as a negative figure, for example against Tax losses carried forward. When the total is negative the note reads "The deferred tax asset is made up as follows:".

Do micro-entities need a deferred tax note?

No. FRS 105 does not allow deferred tax to be recognised, so the note only exists in FRS 102 Section 1A accounts.

Why does "Other deferred tax" print as "Other timing differences"?

They are the same row. The editor uses the shorter label; the printed accounts use the standard wording.

Where to go next

The short version

Deferred taxation note (FRS 102 Section 1A) — in brief

Deferred tax is tax that will become payable (or recoverable) in future because of timing differences between the accounts and the tax computation – most often capital allowances running ahead of depreciation.

The note analyses the closing deferred tax balance across four rows: revaluation of land and buildings, revaluation of investment property, tax losses carried forward, and other timing differences. You type the figures in for both years.

A positive total prints as "The provision for deferred taxation is made up as follows:"; a negative total prints as a deferred tax asset.