Deferred tax

Where a gain is made, for example, on the revaluation of an asset, when that asset is sold it will hopefully be sold at a profit

And, on that occasion, tax will be payable on that profit

So we make provision today for that future tax that will arise on that future profit

That’s a very simple explanation about why we have deferred tax. To get more complicated we need to start talking about permanent and temporary timing differences and therefore the differences between an asset’s carrying value and its tax written down value – but you’ll find examples of that in the free course notes

OK?