Vodafone 2016 Annual Report Download - page 110

Vodafone Group Plc
Annual Report 2016
108
Notes to the consolidated nancial statements (continued)
6. Taxation (continued)
At 31 March 2016, the gross amount and expiry dates of losses available for carry forward are as follows:
Expiring Expiring
within within
5 years 6–10 years Unlimited Total
£m £m £m £m
Losses for which a deferred tax asset is recognised 56 44 82,630 82,730
Losses for which no deferred tax is recognised 278 51 18,887 19,216
334 95 101,517 101,946
At 31 March 2015, the gross amount and expiry dates of losses available for carry forward were as follows:
Expiring Expiring
within within
5 years 6–10 years Unlimited Total
£m £m £m £m
Losses for which a deferred tax asset is recognised 104 64 87,246 87,414
Losses for which no deferred tax is recognised 1,124 543 16,084 17,751
1,228 607 103,330 105,165
Deferred tax assets on losses in Luxembourg
Included in the table above are losses of £64,186 million (2015: £70,576 million) that have arisen in Luxembourg companies, principally as a result
of revaluations of those companies’ investments for local GAAP purposes. These losses do not expire.
A deferred tax asset of £18,931 million (2015: £20,755 million) has been recognised in respect of these losses as we conclude it is probable that the
Luxembourg entities will continue to generate taxable prots in the future against which we can utilise these losses. The Luxembourg companies’
income is derived from the Group’s internal nancing and procurement and roaming activities. The Group has reviewed the latest forecasts for
the Luxembourg companies, including their ability to continue to generate income beyond the forecast period under the tax laws substantively
enacted at the balance sheet date. The assessment also considered whether the structure of the Group would continue to allow the generation
of taxable income. Based on this the Group concludes that it is probable that the Luxembourg companies will continue to generate taxable income
in the future.
Based on the current forecasts the losses will be fully utilised over the next 50 to 60 years. A 5%–10% change in the forecast income in Luxembourg
would change the period over which the losses will be fully utilised by 2–6 years. Any future changes in tax law or the structure of the Group could
have a signicant effect on the use of losses, including the period over which the losses are utilised. In February 2016 the Luxembourg Government
announced their intention to reduce the corporate tax rate (including municipal business tax) to 27.1% for the year ending 31 March 2017 and
26.1% for the year ending 31 March 2018. The announced decrease in the corporate tax rate would reduce the value of our deferred tax assets
by approximately £2.1 billion.
During the current year we utilised £2,277 million of our deferred tax asset as a result of the revaluation of investments based upon the local GAAP
nancial statements at 31 March 2016 (2015: recognition of an additional asset of £2,127 million). The revaluation of investments for local GAAP
purposes, which are based on the Group’s value in use calculations, can give rise to impairments or the reversal of previous impairments. These can
result in a signicant change to our deferred tax assets and the period over which these assets will be utilised.
During the year the Group de-recognised a deferred tax asset of £930 million relating to losses in Luxembourg as a result of the absence of complete
clarity on the tax treatment of certain revaluations of investments for Luxembourg GAAP purposes, combined with the length of time which would
be likely to elapse before these losses would be utilised. We also have £7,642 million (2015: £7,642 million) of Luxembourg losses in a former Cable &
Wireless Worldwide Group company, for which no deferred tax asset has been recognised as it is uncertain whether these losses will be utilised.
Deferred tax assets on losses in Germany
The Group has tax losses of £14,597 million (2015: £13,600 million) in Germany arising on the write down of investments in Germany in 2000.
The losses are available to use against both German federal and trade tax liabilities and they do not expire.
A deferred tax asset of £2,260 million (2015: £2,086 million) has been recognised in respect of these losses as we conclude it is probable that the
German business will continue to generate taxable prots in the future against which we can utilise these losses. The Group has reviewed the latest
forecasts for the German business which incorporate the unsystematic risks of operating in the telecommunications business (see pages 22 to 28).
In the period beyond the 5 year forecast we have reviewed the prots inherent in the terminal period and based on these and our expectations for
the German business we believe it is probable the German losses will be fully utilised.
Based on the current forecasts the losses will be fully utilised over the next 10 to 15 years. A 5%–10% change in the forecast prots of the German
business would change the period over which the losses will be fully utilised by one year.
Deferred tax assets on losses in Spain
During the 2015 year end, the Group acquired Grupo Corporativo Ono S.A. which had tax losses of £2,375 million in Spain and which are available
to offset against the future prots of the Spanish business. The losses do not expire.
A deferred tax asset of £673 million (2015: £603 million) has been recognised in respect of Ono’s losses as we conclude it is probable that the
Spanish business will continue to generate taxable prots in the future against which we can utilise these losses. The Group has reviewed the
latest forecasts for the Spanish business which incorporate the unsystematic risks of operating in the telecommunications business (see pages
22to 28). In the period beyond the 5 year forecast we have reviewed the prots inherent in the value in use calculations and based on these and
ourexpectations for the Spanish business we believe it is probable the losses will be fully utilised.
Based on the current forecasts the losses will be fully utilised over the next 8 to 10 years. A 5%–10% change in the forecast prots of the Spanish
business would not signicantly alter the utilisation period.