BT 2009 Annual Report Download - page 46

ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
44 BT GROUP PLC ANNUAL REPORT & FORM 20-F
BUSINESS AND FINANCIAL REVIEWS FINANCIAL REVIEW
and exposures to credit, liquidity and market risks.
During the period under review the group’s net debt increased to
£10.4bn at 31 March 2009 compared with £9.5bn at 31 March
2008 and £7.9bn at 31 March 2007 (based on the definition of net
debt as set out in note 10).
The following table sets out the group’s contractual obligations
and commitments as they fall due for payment, as at 31 March
2009.
Payments due by period
Less Between Between More
than 1 1 and 3 3 and 5 than 5
Contractual obligations Total year years years years
and commitments £m £m £m £m £m
Loans and other borrowingsa13,573 1,528 3,066 1,819 7,160
Finance lease obligations 332 14 42 24 252
Operating lease obligations 8,004 484 885 780 5,855
Pension deficiency obligations 2,695 525 1,050 560 560
Capital commitments 451 380 62 6 3
Total 25,055 2,931 5,105 3,189 13,830
aExcludes fair value adjustments for hedged risks.
At 31 March 2009, the group had cash, cash equivalents and
current asset investments of £1,463m. The group also had unused
committed borrowing facilities, amounting to £2,300m. At
31 March 2009, £1,190m of debt principal (at hedged rates) fell
due for repayment in the 2010 financial year. These resources will
allow the group to settle its obligations as they fall due. The group
has no significant debt maturities until December 2010.
The directors have a reasonable expectation that the group has
adequate resources to continue in operational existence for the
foreseeable future and therefore continue to adopt the going
concern basis in preparing the financial statements. There has been
no significant change in the financial or trading position of the
group since 31 March 2009.
Off-balance sheet arrangements
As disclosed in the financial statements, there are no off-balance
sheet arrangements that have or are reasonably likely to have a
current or future material effect on the group’s financial condition,
changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditure or capital resources, with
the exception of the following:
Operating leases (note 27)
Capital commitments and guarantees (note 27)
Taxation
Total tax contribution
BT is a significant contributor to the UK Exchequer, collecting and
paying taxes of over £3bn in a typical year. In 2009 we collected
and paid £1,239m of VAT, £1,178m of PAYE and National
Insurance, £210m of UK corporation tax and £236m of UK business
and UK network rates.
Tax strategy
Our strategy is to comply with relevant regulations whilst
minimising the tax burden for BT and our customers. We seek to
achieve this through engagement with our stakeholders including
HMRC and other tax authorities, partners and customers. The BT
Board regularly reviews the group’s tax strategy.
The Board considers that it has a responsibility to minimise the
tax burden for the group and its customers. In this respect the
Board considers it is entirely proper that the group conducts an
appropriate level of responsible tax planning in managing its tax
affairs, being consistent with its obligations to protect the assets of
the company for the benefit of our shareholders. This planning is
carried out within Board defined parameters.
We operate in over 170 countries and with this comes additional
complexity in the taxation arena. However the majority of tax issues
arise in the UK with a small number of issues arising in our overseas
jurisdictions. In terms of the group’s UK corporation tax position, all
years up to and including 2005 are fully agreed. For 2006 and
2007, there are a number of open issues which we are actively
discussing with HMRC with a view to resolving. The UK corporation
tax returns for 2008 were all filed prior to the statutory deadline of
31 March 2009.
We have an open, honest and positive working relationship with
HMRC. We are committed to prompt disclosure and transparency in
all tax matters with HMRC. We recognise that there will be areas of
differing legal interpretations between ourselves and tax
authorities and where this occurs we will engage in proactive
discussion to bring matters to as rapid a conclusion as possible.
Our positive working relationship with HMRC was demonstrated
in 2007 when we worked intensively with HMRC to accelerate the
agreement of all open tax matters up to and including 2005. This
project allowed us to build and develop our working relationship
with HMRC.
We have a policy to lobby the government directly on tax matters
that are likely to impact us and in particular respond to consultation
documents where the impact could be substantial. We also lobby
the government indirectly through the CBI, various working groups
and committees and leading professional advisors.
Tax accounting
At each financial year end an estimate of the tax charge is
calculated for the group and the level of provisioning across the
group is reviewed in detail. As it can take a number of years to
obtain closure in respect of some items contained within the
corporation tax returns it is necessary for us to reflect the risk that
final tax settlements will be at amounts in excess of our submitted
corporation tax computations. The level of provisioning involves a
high degree of judgement.
In 2007 and 2008, the cash tax paid is lower than the income
statement charges. This is partly due to the phasing of UK
corporation tax instalments, the level of provisioning for risks,
taxation of specific items, the impact of deferred tax and the impact
of overseas losses or profits which are relieved or taxed at different
BUSINESS AND FINANCIAL REVIEWS