HSBC 2009 Annual Report Download - page 410

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Note 11
408
The following table reconciles the tax expense which would apply if all profits had been taxed at the UK corporation
tax rate:
2009 2008 2007
US$m % US$m % US$m %
Analysis of tax expense
Taxation at UK corporation tax rate of 28%
(2008: 28.5%; 2007: 30%)1 .................................. 1,982 28.0 2,652 28.5 7,264 30.0
Goodwill impairment ................................................ – – 3,010 32.3 – –
Non-deductible loss on foreign exchange swaps
on rights issue proceeds2 ...................................... 96 1.4 – – – –
Effect of taxing overseas profits in principal
locations at different rates .................................... (1,345) (19.0) (1,339) (14.4) (1,460) (6.0)
Gains not subject to tax ............................................ (238) (3.4) (1,016) (10.9) (296) (1.2)
Adjustments in respect of prior period liabilities ..... (39) (0.6) (67) (0.7) (309) (1.3)
Low income housing tax credits3 ............................. (98) (1.4) (103) (1.1) (107) (0.4)
Effect of profit in associates and joint ventures ....... (499) (7.1) (473) (5.1) (450) (1.9)
Release of deferred tax consequent on
restructuring of Group interests ........................... – – – – (359) (1.5)
Impact of gains arising from dilution of interests
in associates5 ......................................................... – – – – (253) (1.0)
Deferred tax temporary differences not provided4.... 360 5.1 157 1.7 (432) (1.8)
Non taxable income .................................................. (365) (5.2) (519) (5.6) (404) (1.7)
Permanent disallowables .......................................... 223 3.2 217 2.3 202 0.8
Additional provision for tax on overseas dividends .... 341 4.8 294 3.2 335 1.4
Other items ................................................................ (33) (0.4) (4) – 26 0.1
Overall tax expense1 ................................................. 385 5.4 2,809 30.2 3,757 15.5
1 The change in the UK corporation tax rate from 30 per cent to 28 per cent with effect from 1 April 2008 gave rise to a blended tax rate
for 2008 of 28.5 per cent.
2 In August 2009, the UK Government enacted legislation that gains or losses on transactions designated to hedge foreign exchange
exposures connected to rights issues should be disregarded for tax purposes.
3 Low income housing tax credits arise in the US and are designed to encourage the provision of rental housing for low income
households.
4 2008 includes the effect of previously unrecognised temporary differences principally related to the recognition of trading losses (2007:
capital losses).
5 The gains arising from the dilution of HSBC’s interests in associates were not subject to tax and, as such, there is a reconciling item
which reduces the effective tax rate for 2007 (see Note 4).
In addition to the amount charged to the income statement, the aggregate amount of the current and deferred tax
relating to items that are taken to other comprehensive income and directly to equity amounted to US$227 million
reduction in other comprehensive income and equity (2008: US$1,879 million increase in other comprehensive
income and equity; 2007: US$226 million reduction in other comprehensive income and equity).
Deferred taxation
HSBC
2009 2008
US$m US$m
At 1 January ............................................................................................................................................. 5,156 3,425
Income statement credit ........................................................................................................................... 1,668 565
Equity:
– available-for-sale investments .......................................................................................................... (587) 582
– cash flow hedges .............................................................................................................................. (517) 90
– actuarial losses .................................................................................................................................. 978 434
– share-based payments ....................................................................................................................... 9 –
Foreign exchange and other adjustments ................................................................................................ 76 60
At 31 December ....................................................................................................................................... 6,783 5,156
The amount of deferred taxation accounted for in the consolidated balance sheet comprised the following deferred tax
assets and liabilities: