It used to be possible to manage business tax in a way that resulted in a fairly smooth charge over the years, with the amount estimated not too far from the amount paid. However, stricter reporting requirements have resulted in a much more volatile charge, which often bears little relationship to the amount contributed to the government in the period. Thus, tax can reduce net profits before the all-important earnings per share figure is calculated and this can make things difficult when it comes to reporting.

”A company could pay no tax whatsoever, yet still show a full tax charge,” says Kevin Phillips, tax partner at accountants Baker Tilley. ”Accounting standards require you to provide in full for tax liabilities, such as deferred tax, even if they are deferred indefinitely and will never actually be paid. It is now a lot harder to report a smooth charge and cushion against any shocks.”