Accounting Standards Board - Technical - Standards in Issue

Current Tax

FRS 16

Issued: December 1999

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	FRS 16


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FRS 16 addresses all aspects of accounting for current tax. It supersedes SSAP 8 'The treatment of taxation under the imputation system in the accounts of companies', which became out of date when advance corporation tax was abolished early in 1999.

As well as updating SSAP 8, the FRS has changed one of the main requirements, ie the way in which tax associated with dividend income is presented in financial statements. Dividends received from UK companies are no longer reported 'gross', ie by adding the attributable tax credit to both the dividend income and the tax charge. Instead, they are reported at the net amount received. Dividends received from other countries are reported gross only to the extent that they have suffered a withholding tax.

The FRS also incorporates the consensus reached in UITF Abstract 16 'Income and expenses subject to non-standard rates of tax'. The Abstract has therefore been withdrawn.

The FRS comes into force for accounting periods ending on or after 23 March 2000. Earlier adoption is encouraged and it is expected that many companies with December year-ends will wish to apply the FRS in their 1999 financial statements.

Requirements of FRS 16

In summary, FRS 16 requires:

current tax for the period to be recognised in the profit and loss account except to the extent that it relates to gains or losses that have been recognised directly in the statement of total recognised gains and losses. Such tax should also be recognised in the statement of total recognised gains and losses.
dividends, interest and other amounts payable or receivable to be recognised at an amount that:
- includes withholding taxes payable to the tax authorities wholly on behalf of the recipient.
- excludes any other taxes, such as attributable tax credits, not payable wholly on behalf of the recipient.
income and expenses subject to non-standard rates of tax (or exempt from tax) to be included in the pre-tax results on the basis of the income or expenses actually receivable or payable, without any adjustment to reflect a notional amount of tax that would have been paid or relieved in respect of the transaction if it had been taxable, or allowable for tax purposes, on a different basis.
current tax to be measured using tax rates and laws that have been enacted or substantively enacted by the balance sheet date

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To find out how to obtain a copy of this FRS, go to Publications.