Recognition of current tax liabilities and assets

Current income tax is the amount of income taxes payable to (or recoverable from) tax authorities in
respect of the taxable profit (tax loss) for a period (IAS 12:5). Unpaid tax for current and prior periods is
recognised as a liability. However, if the amount already paid in respect of current and prior periods
exceeds the amount due, the excess is recognised as a receivable (IAS 12:12).

Insight – Tax rate change

From 1 April 2023, the main corporation tax rate in the UK (applicable to companies with annual profit
before taxation exceeding £250,000) was increased to 25% from 19%. Entities whose financial year
straddles 1 April must take care to calculate an appropriate tax rate. This will entail calculating a
‘blended’ tax rate, pro-rated for the length of time during the period for which each tax rate applied.

More detail on the change in tax rate and blended rates is set out in the current issue Change in UK tax
rate.

Insight – Income tax payment following a tax examination

The IFRS Interpretations Committee (the Committee) considered recognition of a tax asset when tax laws
require an entity to make an immediate payment when a tax examination results in an additional charge,
even if the entity intends to appeal against the additional charge. The Committee concluded that the
timing of payment should not affect the amount of current tax expense recognised. Therefore, an asset
should be recognised if the amount of cash paid because of a tax examination exceeds the amount of tax
expected to be eventually due.

See also Uncertain tax positions.