Since transitional adjustments and new types of transactions now appear in the accounts (such as financial instruments), unless you are a micro entity, it is essential to have a good understanding of the deferred tax implications. Here we look at some of the areas where small entities are most likely to encounter deferred tax challenges.

Wherever new assets and liabilities are recognised, or measured differently, new timing differences may arise on which deferred tax needs to be calculated. For example, the requirement to include fixed asset investments at fair value creates a new timing difference on which deferred tax has to be provided.