Annual Report 2016
Notes to the Financial Statements
9
Taxation on Profit on Ordinary Activities
Current tax
Current year corporation tax
5,927
Adjustment in respect of prior years
(272)
Foreign tax
34
5,149
(304)
12
Total current tax charge
5,689
4,857
Deferred tax
Origination and reversal of other timing differences
867
Impact of changes in future tax rates
(4,322)
Adjustment in respect of prior years
283
(260)
—
59
Total deferred tax credit
(3,172)
(201)
Total tax charge
2,517
4,656
The tax charge for the year comprises:
2016
2015
(as restated)
£’000
£’000
Tax included in the consolidated statement of comprehensive income
2016
2015
(as restated)
£’000 £’000
Deferred tax
Actuarial gain on pension scheme
Movement in hedging reserve
Effect of change in deferred tax rate
826
(362)
(373)
267
(230)
—
Total tax charge
91
37
The tax assessed on the profit on ordinary activities for the year is lower than the standard rate of corporation tax in the UK of 20% (2015 - 21%).
The differences are reconciled below:
2016
2015
(as restated)
£’000 £’000
Profit on ordinary activities before tax
43,313
32,670
Profit on ordinary activities multiplied by standard UK corporation tax rate of 20% (2015: 21%)
Expenses not deductible for tax purposes including goodwill (net)
Deferred tax provided at lower rate
Impact of changes in future tax rates
Adjustments in respect of prior years
Group relief received not paid for
Difference in foreign tax rates
8,663
951
(88)
(4,322)
11
(2,709)
11
6,861
933
11
—
(245)
(2,904)
—
Total tax charge
2,517
4,656
Reductions in the future UK corporation tax rates from 20% to 19% and then 18% were substantively enacted in July 2015 and will take effect in April
2017 and April 2020 respectively. A further reduction to 17% from April 2020 has been announced but has not been substantively enacted. Deferred
tax has been recognised at 18% or 19% depending on the expected reversal period.
Applying the proposed future tax rate of 17% to the deferred tax balance would have resulted in a reduction of the deferred tax liability and an
additional profit and loss account reserve credit of £2,816,000.
No deferred tax has been recognised on capital gains rolled over against the cost of acquisition of certain property and structures owned by South
Staffordshire Water PLC. The gains will only come into charge if the assets are sold and not replaced by suitable qualifying assets. As the properties
are essential assets of the water supply business it is regarded as unlikely that the gains will come into charge. The potential unprovided deferred tax
amounts to £1,879,000 (2015: £2,087,000).
The tax impact of exceptional items reported in the year ended 31 March 2016 is an increase in the current tax charge of £918,000 and a reduction in
the deferred tax credit of £645,000.
65