BT 2016 Annual Report Download - page 100

Overview The Strategic Report Governance Financial statements Additional information
105
The reduction in the UK corporation tax rate since 2011/12 has
had a major impact on our eective tax rate.
The UK corporation tax rate will fall to 19% from 1 April 2017
and is expected to fall to 17% from 1 April 2020. We expect that
this will continue to have a major impact on our eective tax rate
and our tax cash payments.
Recognition of deferred tax assets on historic trading losses may
also reduce our eective tax rate in the future. In addition, future
changes to our estimates of uncertain tax positions may increase or
reduce our eective tax rate.
We receive a tax benefit from R&D incentives in the UK and do not
expect this to be reduced as a result of the OECD Base Erosion and
Profit Shifting project.
Key tax risks
Our key risks relate to the uncertainty of the tax treatment of
providing telecommunications services globally. We follow OECD
guidelines and have a tax control framework in place to monitor
and manage tax.
Additionally, we have extensive and long‑standing UK operations
that necessarily require the use of estimates. We routinely work
with HMRC to validate these estimates.
Tax losses
We have an asset of £325m (2014/15: £44m) relating to tax
losses on our balance sheet. This relates mainly to historic UK losses
acquired with EE. We expect to be able to use this against future
profits of EE.
We have £3.9bn of tax losses arising from trading (2014/15:
£3.6bn) that we’ve not given any value to on our balance sheet.
These arose mostly in our non‑UK companies in earlier financial
years. We might be able to use the non‑UK losses to oset tax
liabilities in the future, but this will depend on us making profits
in countries where we’ve previously made losses and agreeing the
value of the tax losses with the local tax authorities. This is why we
judge that these amounts should not be recognised as assets on
our balance sheet.
We also have £17.0bn (2014/15: £17.1bn) of capital losses in
the UK. We have no expectation of being able to use these losses in
the long term.
We’ve given more details in note 9 to the consolidated financial
statements.
Capital expenditure
We’re making significant investments in our strategic
growth areas and to improve our customer service.
The Design Council is responsible for BT delivering an ecient and
optimised investment plan, meeting the strategic needs of the
group to help drive sustainable profitable revenue growth.
Capital expenditure now includes the investment EE is making to
maintain mobile network leadership. We’re also investing in the
integration of EE into the wider group.
For the year, our capital expenditure net of grant funding was
£2,650m (2014/15: £2,326m). We’ve shown below how we
spent this across our major capital programmes. Of the total
group capital expenditure EE accounted for £111m and capital
expenditure related to the integration of EE was £5m. We expect
this to grow to around £100m in both 2016/17 and 2017/18 as
our integration of EE gathers pace to drive synergies.
£m
Customer capex
Fibre capex
Network capex
Broadband capex Support/Other capex
EE
0
500
1,000
1,500
2,000
2,500
3,000
201620152014
Capital expenditure
Year ended 31 March