Barclays 2006 Annual Report Download - page 55

Barclays PLC
Annual Report 2006 51
Operating review
1
Tax
The overall tax charge is explained in the following table:
2006 2005 2004
£m £m £m
Profit before tax 7,136 5,280 4,580
Tax charge at average UK
corporation tax rate of 30% 2,141 1,584 1,374
Prior year adjustments 28 (130) (26)
Differing overseas tax rates (17) (35) (110)
Non-taxable gains and income
(including amounts offset by
unrecognised losses) (393) (129) (51)
Share-based payments 27 (12) –
Deferred tax assets not recognised (4) (7) 24
Other non-allowable expenses 159 168 68
Overall tax charge 1,941 1,439 1,279
Effective tax rate 27% 27% 28%
2006/05
The charge for the period is based upon a UK corporation tax rate of
30% for the calendar year 2006 (2005: 30%). The effective rate of tax
for 2006, based on profit before tax, was 27.2% (2005: 27.3%). The
effective tax rate differs from 30% as it takes account of the different tax
rates which are applied to the profits earned outside the UK, disallowable
expenditure, certain non-taxable gains and adjustments to prior year
tax provisions. The effective tax rate for 2006 is consistent with the prior
period. The tax charge for the year includes £1,234m (2005: £961m)
arising in the UK and £707m (2005: £478m) arising overseas.
The profit on disposal of subsidiaries, associates and joint ventures of
£323m was substantially offset by losses or exemptions. The effective
tax rate on profit before business disposals was 28.5%.
2005/04
In 2005, the charge for the period was based upon a UK corporation tax
rate of 30% for the calendar year 2005 (2004: 30%). The effective rate
of tax for 2005 was 27% (2004: 28%). This was lower than the standard
rate due to the beneficial effects of lower tax on certain overseas income
and certain non-taxable gains. The tax charge for the year included
£961m (2004: £1,028m) arising in the UK and £478m (2004: £251m)
arising overseas.
Reconciliation of economic profit
2006 2005 2004
£m £m £m
Profit attributable to equity
holders of the parent 4,571 3,447 3,254
Addback of amortisation charged
on acquired intangible assets(a) 83 29 6
Profit for economic profit purposes 4,654 3,476 3,260
Average shareholders’ equity
for economic profit purposes(b)
(rounded to nearest £50m) 20,500 18,150 17,800
Post-tax cost of equity 9.5% 9.5% 9.5%
Capital charge(c) (1,950) (1,724) (1,692)
Economic profit 2,704 1,752 1,568
IFRS compared with US GAAP
The Group also provides results on the basis of accounting principles
generally accepted in the United States (US GAAP). The impact on net
income and shareholders’ equity of applying US GAAP is set out below.
The individual IFRS/US GAAP adjustments are discussed in Note 60.
Profit attributable to equity holders of the parent (IFRS)/net
income (US GAAP)
2006 2005 2004
£m £m £m
Barclays PLC Group
Profit attributable to equity
holders of the parent (IFRS)/
Net income (US GAAP)
IFRS 4,571 3,447 3,254
US GAAP 4,318 2,932 3,032
Barclays Bank PLC Group
Profit attributable to equity
holders of the parent (IFRS)/
Net income (US GAAP)
IFRS 4,914 3,695 3,263
US GAAP 4,650 3,164 3,137
Shareholders’ equity excluding minority interests
(IFRS)/shareholders’ equity (US GAAP)
2006 2005
£m £m
Barclays PLC Group
Shareholders’ equity excluding
minority interests (IFRS)/
Shareholders’ equity (US GAAP)
IFRS 19,799 17,426
US GAAP 20,032 18,461
Barclays Bank PLC Group
Shareholders’ equity excluding
minority interests (IFRS)/
Shareholders’ equity (US GAAP)
IFRS 25,421 22,665
US GAAP 25,068 23,114
The Group does not manage its business with regard to reported trends
on a US GAAP basis. Consequently the level of adjustment from the
application of US GAAP in current or past periods is not necessarily
indicative of the magnitude or direction of such adjustment in
subsequent periods.
Notes
(a) Amortisation charged for purchased intangibles, adjusted for tax and minority interests.
(b) Average shareholders’ equity for economic profit purposes, includes historic goodwill, and is adjusted to reflect the impact of hedging, available for sale securities
and retirement benefits.
(c) The capital charge includes a charge for purchased goodwill and intangible assets from business acquisitions.