Marks and Spencer 2016 Annual Report Download - page 101

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ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
OUR BUSINESSOUR PERFORMANCEGOVERNANCEFINANCIAL STATEMENTS
7 INCOME TAX EXPENSE
A. Taxation charge
2016
£m
2015
£m
Current tax
UK corporation tax on profi ts for the year at 20% (last year 21%)
– current year 111.6 106.5
– adjustments in respect of prior years (5.6) (7.5)
UK current tax 106.0 99.0
Overseas current taxation
– current year 12.4 12.3
– adjustments in respect of prior years (0.5) (3.0)
Total current taxation 117.9 108.3
Deferred tax
– origination and reversal of temporary di erences (28.3) 5.8
– adjustments in respect of prior years 2.6 4.5
– changes in tax rate (7.8) (0.3)
Total deferred tax (see note 23) (33.5) 10.0
Total income tax expense 84.4 118 . 3
B. Taxation reconciliation
The e ective tax rate was 17.3% (last year 19.7%) and is reconciled below:
2016
£m
2015
£m
Profi t before tax 488.8 600.0
Notional taxation at standard UK corporation tax rate of 20% (last year 21%) 97.8 126.0
Depreciation and other amounts in relation to fi xed assets that do not qualify for tax relief 2.3 5.3
Other income and expenses that are not taxable or allowable for tax purposes (9.6) (9.9)
Recalculation of deferred tax balances due to the change in statutory UK tax rates (7.8) (0.3)
Overseas profi ts taxed at rates di erent to those of the UK (4.3) (7.9)
Overseas tax losses where there is no relief anticipated in the foreseeable future 3.7 4.8
Adjustments to current and deferred tax charges in respect of prior periods (3.5) (6.1)
Adjustments to underlying profi t:
– depreciation and other amounts in relation to fi xed assets that do not qualify for tax relief 2.6 –
– international store review charges where no tax relief is available 15.3 7.7
– (profi ts)/losses on property disposals (1.5) (1.3)
– acquisition of Lima (Bradford) S.à r.l. joint venture (5.4) –
– recalculation of deferred tax balances due to change in statutory UK tax rates –0.1
– overseas profi ts taxed at rates di erent to those of the UK (5.2) (0.1)
Total income tax expense 84.4 118 . 3
After excluding non-underlying items the underlying e ective tax rate was 17.2% (last year 18.9%).
On 18 November 2015, the Finance Bill received Royal Assent and so the previously announced reductions in the rate of corporation tax to
19% from 1 April 2017 and 18% from 1 April 2020 were enacted. The Group has remeasured its UK deferred tax assets and liabilities at the end
of the reporting period at the rates of 20%, 19% and 18% based on an expectation of when those balances are expected to unwind. This has
resulted in the recognition of a deferred tax credit of £7.6m in the income statement and the recognition of a deferred tax credit of £20.9m
in other comprehensive income. Also included in the total deferred tax credit above of £7.8m is £0.2m relating to rate changes in Slovakia.
On 16 March 2016, the Chancellor of the Exchequer announced that the planned reduction to 18% from 1 April 2020 would instead be a
reduction to 17%. The Finance Bill was not substantively enacted at the year end date therefore the Group has not recognised the one-o
impact of remeasuring balances from 18% to 17%. However, if 17% was applied, it is estimated that this would result in a further deferred tax
credit of £3.5m in the income statement and the recognition of a further deferred tax credit of £9.6m in other comprehensive income.