Tesco 2012 Annual Report Download - page 110

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Notes to the Group financial statements
Note 5 Finance income and costs
Continuing operations 2012
£m
2011
£m
Finance income
Bank interest receivable and similar income on cash and cash equivalents 114 131
Net pension finance income (Note 26) 18 –
IAS 32 and IAS 39 ‘Financial Instruments’ – fair value remeasurements 44 19
Total finance income 176 150
Finance costs
Interest payable on short-term bank loans and overdrafts repayable within five years (62) (101)
Finance charges payable under finance leases and hire purchase contracts (11) (10)
GBP MTN (226) (233)
EUR MTN (180) (194)
USD MTN (67) (57)
Other MTNs (11) (17)
Capitalised interest (Note 11) 140 147
Total finance costs (417) (465)
Net pension finance cost (Note 26) – (18)
Total finance costs (417) (483)
GBP MTNs
Interest payable on the 4% RPI GBP MTN 2016 includes £13m (2011: £12m) of Retail Price Index (RPI) related amortisation.
Interest payable on the 3.322% LPI GBP MTN 2025 includes £13m (2011: £10m) of RPI related amortisation.
Interest payable on the 1.982% RPI GBP MTN 2036 includes £11m (2011: £11m) of RPI related amortisation.
Note 6 Taxation
Recognised in the Group Income Statement
Continuing operations 2012
£m
2011
£m
Current tax expense
UK corporation tax 579 694
Foreign tax 196 181
Adjustments in respect of prior years (42) (114)
733 761
Deferred tax expense
Origination and reversal of temporary differences 230 148
Adjustments in respect of prior years (12) 12
Change in tax rate (72) (57)
146 103
Total income tax expense 879 864
The Finance Act 2011 included legislation to reduce the main rate of corporation tax from 27% to 26% from 1 April 2011 and to 25% from 1 April 2012.
The reduction from 27% to 25% was substantively enacted at the balance sheet date and has therefore been reflected in these Group financial statements.
In addition to the changes in rates of corporation tax disclosed above, a number of further changes to the UK corporation tax system were announced
in both the March 2011 and March 2012 UK Budget Statements. A resolution passed by Parliament on 26 March 2012 reduced the main rate of
corporation tax to 24% from 1 April 2012. Legislation to reduce the main rate of corporation tax from 24% to 23% from 1 April 2013 is expected to be
included in the Finance Act 2012. Further reductions to the main rate are proposed to reduce the rate to 22% by 1 April 2014. None of these expected
rate reductions had been substantively enacted at the balance sheet date and are therefore not reflected in these Group financial statements.
The effect of the changes enacted by Parliament on 26 March 2012 to reduce the corporation tax rate from 25% to 24%, with effect from
1 April 2012, is to reduce the deferred tax liability provided at the balance sheet date by £35m (£53m increase in profit and £18m decrease in
other comprehensive income).
The proposed reductions of the main rate of corporation tax by 1% per annum to 22% by 1 April 2014 are expected to be enacted separately each year.
The overall effect of the further changes from 24% to 22%, if these applied to the deferred tax balance at the balance sheet date, would be to reduce
the deferred tax liability by £70m (being £35m recognised in 2013 and £35m recognised in 2014).
106 Tesco PLC Annual Report and Financial Statements 2012