SSAP 15 - Status of SSAP 15

SSAP 15 is the accounting standard that has now been superseded by FRS 19 'Deferred Tax'

However, FRS 19 need not be applied until financial years ending on or after 23 January 2002.

Background to SSAP 15

The amount of tax payable on the profits of a particular period often bears little relationship to the amount of income and expenditure appearing in the financial statements. This results from the different basis on which profits are arrived at for the purpose of tax computations as opposed to the basis on which profits are stated in financial statements.

The different basis of arriving at profits for tax purposes derives from two main sources. Firstly, certain types of income are tax-free and certain types of expenditure are disallowable, giving rise to 'permanent differences' between taxable and accounting profits. Permanent differences also arise where there are tax allowances or charges with no corresponding amount in the financial statements. Secondly, there are items that are included in the financial statements of a period different from that in which they are dealt with for tax purposes, giving rise to 'timing differences'; thus revenue, gains, expenditure and losses may be included in the financial statements either earlier or later than they enter into the computation of profit for tax purposes.

Requirements of SSAP 15

There are various different bases for computing deferred tax. SSAP 15 requires that deferred tax should be calculated under the 'liability method', ie calculated at the rate of tax that it is estimated will be applicable when the timing differences reverse. Deferred tax is accounted for on the 'partial provision' basis, which means that tax deferred or accelerated by the effect of timing differences should be accounted for only to the extent that it is probable that a liability or asset will crystallise (based on reasonable assumptions). The standard also lays out presentation and disclosure requirements.

SSAP 15 is effective for accounting periods starting on or after 1 April 1985.