Taxes Consolidation Act 1997 section 111X

Total deferred tax adjustment amount

Section 111X explains how to calculate the total deferred tax adjustment amount for a constituent entity, including the items that must be added to or excluded from the calculation, the treatment of loss deferred tax assets, the five-year recapture rule for unreversed deferred tax liabilities, and the tracking methodologies available.

• Where the tax rate used in a company's accounts is at or below the minimum tax rate, the full deferred tax expense is the adjustment amount; where it exceeds the minimum rate, the expense must be recalculated at the minimum rate, with increases for previously disallowed, unclaimed or recaptured amounts actually paid during the year.
• Specific items are excluded from the adjustment, including deferred tax on items outside qualifying income, disallowed and unclaimed accruals, valuation or recognition adjustments, rate-change re-measurements, and tax credit generation or use (subject to a substitute loss carry-forward exception).
• A deferred tax liability that has not reversed or been paid within five years must generally be recaptured, except for certain exempt categories such as tangible asset allowances, R&D expenses, and insurance reserves, with companies choosing to track liabilities on an item-by-item, general ledger, or aggregate category basis.
• Companies may use a FIFO methodology to determine whether deferred tax liabilities have reversed where accounts share a similar reversal trend; otherwise, the LIFO methodology must be used, and where the GloBE carrying value of an asset or liability differs from financial statement values, deferred tax must be recalculated by reference to the GloBE carrying value.

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