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Financial statements Marks and Spencer Group plc Annual report and financial statements 2012 85
Overview Strategic review Financial review Governance Financial statements and other information
7 Income tax expense
A. Tax charge
2012
£m
2011
£m
Current tax
UK corporation tax on profits for the year
– current year 175.9 215.8
– adjustments in respect of prior years (9.3) (8.6)
UK current tax 166.6 207.2
Overseas current tax 11.6 11.1
Total current tax 178.2 218.3
Deferred tax
– origination and reversal of temporary differences (10.5) (30.4)
– adjustments in respect of prior years 14.0 7.2
– changes in tax rate (13.3) (13.1)
Total deferred tax (see note 23) (9.8) (36.3)
Total income tax expense 168.4 182.0
B. Tax reconciliation
2012
£m
2011
£m
Profit before tax 658.0 780.6
Tax at the standard UK corporation tax rate of 26% (last year 28%) 171.1 218.6
Depreciation, charges and other amounts on non-qualifying fixed assets 3.6 1.9
Other income and expenses not taxable or deductible (11.1) (11.2)
Deferred tax rate change benefit (13.1) (12.9)
Overseas profits taxed at rates different to those of the UK (8.6) (4.2)
Benefit of current year losses not recognised 14.3 7.3
Adjustments to tax charge in respect of prior periods 4.7 (1.4)
Adjustments to underlying profit:
Profit on property disposals –(0.8)
IAS 19 Ireland one-off pension credit –(1.7)
IAS 36 Impairment of assets 11.7 1.8
IAS 39 Fair value movement of financial instrument (4.0) (15.2)
Deferred tax rate change benefit (0.2) (0.2)
Total income tax expense 168.4 182.0
The effective tax rate was 25.6% (last year 23.3%) and the underlying effective tax rate was 24.5% (last year 25.1%).
On 21 March 2012, the Chancellor of the Exchequer announced the main rate of corporation tax will reduce from 26% to 24%
from 1 April 2012. This change of rate became substantively enacted for the purposes of IAS 12 “Income Taxes” on 26 March
2012 when the House of Commons passed a resolution in respect of it under the provisional Collection of Taxes Act 1968. The
Group has remeasured its UK deferred tax assets and liabilities at the end of the reporting period at 24%, which has resulted in
the recognition of a deferred tax credit of £13.3m in the income statement (reducing the total effective tax rate by 2.0%), and the
recognition of a deferred tax credit of £1.8m in other comprehensive income.
The Chancellor further stated his intention to reduce the main rate of corporation tax from 24% to 23% from 1 April 2013 and a
further 1% reduction to 22% from 1 April 2014. These changes have not been substantively enacted at the date of the statement of
financial position. Had these changes been enacted, then the cumulative effects would have been credits to the income statement
of £19.9m (23%) or £26.5m (22%), and credits to other comprehensive income of £2.7m (23%) or £3.6m (22%).