HSBC 2014 Annual Report Download - page 134

HSBC BANK PLC
Notes on the Financial Statements (continued)
132
8 Tax
Accounting policy
Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it
relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in the same statement in
which the related item appears.
Current tax is the tax expected to be payable on the taxable profit for the year, calculated using tax rates enacted or substantively
enacted by the balance sheet date, and any adjustment to tax payable in respect of previous years. Current tax assets and liabilities are
offset when the group intends to settle on a net basis and the legal right to offset exists.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet and
the amounts attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be
available against which deductible temporary differences can be utilised.
Deferred tax is calculated using the tax rates expected to apply in the periods in which the assets will be realised or the liabilities
settled based on tax rates and laws enacted, or substantively enacted, by the balance sheet date. Deferred tax assets and liabilities are
offset when they arise in the same tax reporting group and relate to income taxes levied by the same taxation authority, and when the
group has a legal right to offset.
Deferred tax relating to actuarial gains and losses on post-employment benefits is recognised in other comprehensive income.
Deferred tax relating to share-based payment transactions is recognised directly in equity to the extent that the amount of the
estimated future tax deduction exceeds the amount of the related cumulative remuneration expense. Deferred tax relating to fair
value remeasurements of available-for-sale investments and cash flow hedging instruments is credited or charged directly to other
comprehensive income and is subsequently recognised in the income statement when the deferred fair value gain or loss is recognised
in the income statement.
2014
2013
£m
£m
Current tax
UK corporation tax
249
64
– for this year
225
176
– adjustment in respect of prior years
24
(112)
Overseas tax
349
360
– for this year
344
361
– adjustment in respect of prior years
5
(1)
598
424
Deferred tax
(34)
330
origination and reversal of temporary differences
(2)
254
– effect of changes in the tax rates
(13)
47
– adjustment in respect of prior years
(19)
29
Total tax expense for the year ended 31 December
564
754
The UK corporation tax rate applying to HSBC Bank plc and its subsidiaries was 21.5 per cent (2013: 23.25 per cent). Other
overseas subsidiaries and overseas branches provided for taxation at the appropriate rates in the countries in which they
operate.
The main rate of corporation tax in the UK was reduced from 23% to 21% on 1 April 2014 and will be further reduced to
20% on 1 April 2015. The reduction in the corporation tax rate to 20% was enacted through the 2013 Finance Act on 17
July 2013. It is not expected that the future rate reduction will have a significant effect on the group.
The Group’s legal entities are subject to routine review and audit by tax authorities in the territories in which the Group
operates. Where the ultimate tax treatment is uncertain the Group provides for potential tax liabilities that may arise on
the basis of the amounts expected to be paid to the tax authorities. The amounts ultimately paid may differ materially
from the amounts provided depending on the ultimate resolution of such matters.