Understand what the IR10 is designed to do
The IR10 is a financial statements summary used by Inland Revenue alongside certain income tax returns. It condenses information from the final annual accounts into standard categories. It is not a substitute for the underlying financial statements or workpapers. The numbers should come from a completed, reconciled and reviewed set of accounts, and the final IR10 should agree to the tax return and the company’s retained records.
Because account names differ between businesses, careful mapping is required. A chart of accounts may contain detailed lines for sales channels, wages, software, subcontractors, vehicles and finance costs, while the IR10 uses broader reporting fields. The preparer should maintain a mapping schedule that shows which ledger accounts feed each IR10 field and how any tax-only or presentation adjustments have been handled.
Start from the final trial balance, not a draft report
Prepare the IR10 only after final year-end journals have been posted. This includes depreciation, accruals, prepayments, inventory adjustments, bad debts, private-use allocations, shareholder account entries and tax-related reclassifications. If the IR10 is completed from a draft trial balance and the accounts later change, inconsistencies can arise between the form, financial statements and tax return.
Save the exact final trial balance used for mapping. Include account codes, account names, debit or credit balances and the mapping destination. A control total should confirm that the balance sheet balances and that the profit in the mapping agrees to the final accounts. Where a figure is split across more than one IR10 category, document the calculation rather than manually entering an unexplained amount.
Map income and expenses consistently
Review revenue streams and identify whether any items need separate presentation. Sales, commissions, interest, rent, grants, asset disposal proceeds and other income should not be grouped automatically without considering the IR10 instructions and the tax return treatment. Expense lines should be mapped consistently from year to year, but prior-year mapping should not override the current facts.
Tax-sensitive costs require additional care. Entertainment, motor vehicles, home office, depreciation, interest, professional fees, shareholder remuneration and non-deductible expenditure may have accounting and tax differences. The IR10 is a financial summary, while the income tax return may include tax adjustments. Keep the accounting figure, tax adjustment and final taxable amount clearly separated in the workpapers so the reviewer can follow the reconciliation.
Map balance-sheet items and shareholder accounts
Balance-sheet fields should agree to the final statement of financial position. Reconcile bank accounts, receivables, inventory, fixed assets, payables, taxes, loans and equity before mapping them. Shareholder current accounts should be supported by detailed transaction analysis, especially where drawings, salaries, dividends, expenses paid personally or funds introduced are involved. The classification of debit and credit balances should follow the final accounts and the current IR10 guidance.
Fixed assets should agree to the depreciation schedule, including additions, disposals and accumulated depreciation. Loans should agree to lender statements and identify current and non-current portions if relevant to the accounts. GST and PAYE balances should tie to filed or draft returns and subsequent payments. Any material difference between a supporting schedule and the ledger should be resolved before the IR10 is finalised.
Complete the review and retain the mapping
The reviewer should compare the current IR10 with the prior year and investigate significant movements or changes in classification. A reasonableness review can identify missing revenue, unusual expense ratios, negative asset balances, unexpected shareholder movements or balances mapped to the wrong category. The final form should be checked against Inland Revenue’s current IR10 guide because field definitions and administrative requirements may change.
Retain the completed IR10, the official guide used, final financial statements, tax reconciliation, final trial balance and detailed mapping schedule. This makes amendments and future-year preparation much easier. A good mapping file also supports automation: once the chart of accounts is stable and the rules are documented, the next annual process can begin with a controlled template rather than starting from a blank form.