Peachtree 2015 Annual Report Download - page 126

The Sage Group plc | Annual Report & Accounts 2015
124
Results for the year continued
4 Income tax expense continued
The tax for the year is higher (2014: higher) than the standard rate of corporation tax in the UK of 20.5% (2014: 22%). The differences are
explained below:
Note
2015
£m
2014
(restated)
£m
Statutory profit on ordinary activities before income tax 275.8 278.7
Statutory profit on ordinary activities multiplied by rate of corporation tax in the UK of 20.5% (2014: 22 %) 56.5 61.3
Tax effects of:
Adjustments in respect of prior years (11.5) (6.3)
Adjustments in respect of foreign tax rates 22.4 22.0
Non-deductible expenses and permanent items 6.6 4.5
Non-deductible impairment 10.5 9.8
Local business tax 3.3 2.8
R&D tax credits (1.7) (2.1)
Recognition of amortisation claims (4.4) (2.0)
Deferred tax on share options (0.2) (0.2)
Total statutory income tax 81.5 89.8
The effective tax rate on statutory profit before tax was 30% (FY14: 32%), whilst the effective tax rate on underlying profit before tax was
25% (FY14: 27%). The difference between the statutory effective tax rate and the underlying tax rate relates to an impairment which is not
deductible for tax purposes.
The underlying effective tax rate is higher than the UK’s statutory rate of tax due to the geographic profile of the Group. In addition, there
is an obligation to account for local business taxes in the corporate tax charge. These additional tax charges are offset by research and
development tax credits which are a government incentive in a number of operating territories.
The 2014 tax reconciliation has been restated to show the relationship between the group’s statutory profit before income tax and
income tax expense, rather than the relationship between underlying profit before tax and underlying tax charge, as presented in the
2014 financial statements.
5 Earnings per share
This note shows how earnings per share (“EPS”) is calculated. EPS is the amount of post-tax profit attributable to each ordinary share.
Basic EPS is calculated on profit for the year attributable to equity shareholders divided by the weighted average number of shares in
issue during the year. Diluted EPS shows what the impact would be if all outstanding, exercisable share options were exercised and
treated as ordinary shares at the year-end.
This note also provides a reconciliation between the statutory profit figure, which ties to the consolidated income statement on
page 104, and the Group’s internal measure of performance, underlying profit. See note 3.6 for details of the adjustments made
between statutory and underlying profit, and note 4 for the tax impact on these adjustments.
Accounting policy
Basic earnings per share is calculated by dividing the profit for the year by the weighted average number of ordinary shares in issue
during the year, excluding those held as treasury shares, which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive ordinary shares, exercisable at the end of the year. The Group has one class of dilutive potential ordinary shares.
They are share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary
shares during the year.