Fair Tax Mark – model tax reconciliation

Looking at the model tax reconciliation for the Fair Tax Mark, I can’t see any difference from a normal tax rec.

In particular, though, the example has this large figure lumped in as “expenses not deductible for tax purposes”.  Should this not be broken down and some clearer narrative given?

The criterion specifies that 75% of the reconciling items should be broken down to get full points.  75% is a hard thing to calculate when you have figures going in both directions (£2,491 is clearly more than 75% of the £136 difference to be reconciled), but £2,491 out of a tax charge of £20,951 looks fairly significant to me. 

I know it’s not current GAAP to do so – I’ve had a lot of conversations with auditors and accountants who’ve just lumped things together that I’ve suggested shuld be broken down – but isn’t the point of the FTM to go above and beyond that?



3 thoughts on “Fair Tax Mark – model tax reconciliation

  1. It’s different because it shows the reconciliation to current tax and deferred tax separately. Whereas the FRS 102 (or IAS 12 for SMEs that have decided to adopt IFRS) requirement is to show a reconciliation to total tax only. So you don’t actually *need* to reconcile to current tax. This is a particular bugbear of Richard Murphy’s, as he suspects many companies build up large deferred tax liabilities which may never crystallise into a current tax liability.

    I’d agree with the rest of your point.

    • Ah, I hadn’t spotted that the image was actually a clickable link that hid most of the detail!

      The commentary on the tax rec seems needlessly verbose, without actually explaining anything. Two long paragraphs explain capital allowances, and then say that the company saved tax because of them: would it not be a lot more useful to simply say that AIA gave accelerated relief?

      If a brief explanation of ACAs and STTDs is needed, would it not be more useful to have a link to a separate paragraph? The FTM website could host these “this is how the UK tax system works” pages, and the company could simply then link to them. The model notes could then be reduced to something like:

      “See LINK for an explanation of capital allowances. The company benefited from the Annual Investment Allowance, which reduced the current tax charge, but increased the deferred tax charge.

      “See LINK for an explanation of short-term timing differences. This adjustment relates to interest which is taxable in a different year from receipt.

      “See LINK for an explanation of prior-year adjustments. All the adjustments above relate to changes to the tax return after signature of the accounts and before filing with HMRC.

      “See LINK for an explanation of why some expenses are not deductible for tax purposes. The expenses above are XXXXX”

      That would seem a lot clearer to read, without losing any of the information. It would also mean that the explanations could be universally agreed, and wouldn’t need to be reinvented by each comapny.

  2. I think that’s another good point

    It would probably be better to ask pioneers to provide gross movements, not those net of figures which cancel them out. Then you can actually assess the magnitude of risk. Otherwise, the risk is hidden.

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