How to prepare corporate tax provision workpapers with an AI agent

Have the agent do the mechanical half of the tax provision: map the trial balance to tax adjustments using the prior period's approved mapping, compute current and deferred tax, roll forward temporary differences and draft the effective rate reconciliation. The tax manager decides every new or uncertain treatment, confirms rates and signs. Nothing posts until the controller approves the journal.

What is the tax provision, and who owns it?

The tax provision is the tax charge in the accounts and the related balances. Current tax is the tax payable on this period's taxable profit: accounting profit adjusted for items the tax rules treat differently, such as expenses that are not deductible, tax depreciation in place of accounting depreciation, and provisions that are only deductible when used. Deferred tax recognises the future tax effect of temporary differences between the accounting and tax values of assets and liabilities. The effective rate reconciliation explains why the tax charge differs from profit multiplied by the headline rate.

The tax manager owns the provision. The financial controller owns the journal. External advisers often review it, and auditors always do, because judgements here move profit and balance sheet together.

What are the steps, and who acts at each one?

1. Agent, depth 1: extracts the trial balance. At the reporting date, reconciled to the signed accounts.
2. Agent, depth 2: maps accounts to tax treatments. Applies the approved mapping from the prior period: fully deductible, non-deductible, timing difference, capital item. New accounts, or accounts whose use has changed, are left unmapped and listed.
3. Person, tax manager: decides new mappings. Every unmapped account gets a treatment and a reason. Evidence: a mapping change log.
4. Agent, depth 2: computes current tax. Accounting profit, adjustments by category, tax depreciation from the tax fixed asset register, losses brought forward and used, taxable profit, tax at the rates the tax manager confirmed.
5. Agent, depth 2: rolls forward deferred tax. Temporary differences by category, opening to closing, at the rates expected to apply, split between profit and loss and equity where relevant.
6. Agent, depth 2: drafts the effective rate reconciliation. Each reconciling item tied to a line in the computation.
7. Person, tax manager: reviews uncertain positions. Items where the tax treatment could be challenged, and whether a provision for uncertainty is needed. The agent lists candidates; it does not estimate the likelihood of challenge.
8. Agent, depth 2: drafts the journal and disclosure data. Parked for approval.
9. Person, tax manager and financial controller: sign the workpaper and approve the journal.

Which controls matter, and what evidence do they leave?

Mapping under change control. Only the tax manager changes mappings. Evidence: mapping version and change log on the workpaper.

Rates confirmed by a person. The agent does not infer rates from the internet or prior files. Evidence: a rates table approved for the period.

Tie-outs. Profit before tax ties to the accounts; the deferred tax balance ties to the ledger; the rate reconciliation sums to the charge. Evidence: tie-out checks on the first page.

Prior-year true-up. Differences between the prior year's provision and the filed return are identified and explained. Evidence: the true-up schedule.

Recognition of deferred tax assets. Whether future profits support recognising losses or other assets is a judgement. Evidence: the tax manager's memo, not the agent's draft.

What should you measure?

• Unmapped accounts per period. A rising number means the chart of accounts is changing faster than the mapping.
• Prior-year true-ups, by size. Large true-ups mean the prior provision was weak.
• Review points raised by advisers or auditors on the agent's computation.
• Days from close to signed provision.

Where does it usually go wrong?

New accounts default to deductible. A new account for fines or entertainment is created mid-year and falls into a deductible bucket. Leaving new accounts unmapped prevents this.

Expense coding drives tax. Non-deductible items coded to general expense accounts are invisible to the mapping. Coding at source matters, especially for card spend and expense claims, where entertainment is often coded as general cost.

Provisions treated alike. General and specific provisions, such as bad debt provisions, may have different tax treatment in many regimes. The split should come from the bad debt provision workpapers rather than being re-derived.

Rates assumed. A rate change announced but not yet law is applied too early, or one in force is missed. A person confirms the rate set each period.

Lender-style models borrowed. A bank's provision for credit losses, as in loan loss provision workpapers, interacts with tax too, but the tax treatment of credit loss provisions follows its own rules in each regime. Do not assume the accounting split carries over.

Indirect taxes mixed in. Sales tax balances are not part of the income tax provision. Keep them separate; whether an agent can prepare VAT or sales tax returns is a different capability.

Where Pryme fits

In Pryme, mapping, computation and drafting are separate capabilities, each certified through Attest on your own prior provisions. The trial balance arrives sealed from the ledger and the rates table as a signed source from the tax manager, so every figure in the computation shows where it came from. Journals are held and every step is filed. The wider finance bounds are in AI agents for finance.