Notes to the financial statements

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

6 Tax expense

The major components of income tax expense for the years ended 31 March 2014 and 2013 are:

Consolidated income statement	2014 £m	2013 £m
Current income tax
Adjustments in respect of previous years – current tax	0.2	–
– transfer from deferred tax	–	(2.8)
	0.2	(2.8)
Deferred income tax
Relating to origination and reversal of temporary differences	8.0	(3.3)
Effect of change in tax rate	(1.9)	(0.9)
Adjustments in respect of previous years – deferred tax	(0.9)	1.4
– transfer to current tax	–	2.8
	5.4	(2.8)
Analysed: Before exceptional items	9.4	9.2
Exceptional items	(4.0)	(12.0)
	5.4	(2.8)

Reconciliation between tax charge/(credit) and the profit/(loss) before tax multiplied by the statutory rate of corporation tax in the UK:

	2014 £m	2013 £m
Profit/(loss) before tax	54.2	(10.7)

Tax at UK statutory corporation tax rate of 23% (2013: 24%)	12.5	(2.5)
Adjustments in respect of previous years	(0.7)	1.4
Adjustment in respect of associate’s profits	(0.1)	–
Deferred tax adjustment for change in UK corporation tax rate (23% to 20%; 2013: 24% to 23%)*	(1.9)	(0.9)
Non-deductible expenses	1.2	1.5
Profits offset by available tax relief	(5.6)	(2.3)
	5.4	(2.8)

* Owing to the availability of brought forward trading tax losses, the Group does not expect any taxable profits to arise before 1 April 2015, accordingly deferred tax has been provided on all temporary differences at 20%.

The effective pre-exceptional rate of tax on Group profit before tax is 14.6% (2013: 20.1%). The effective tax rate continues to be below the headline rate of UK corporation tax due to the property profit income stream, on which the tax charges are sheltered by brought forward capital losses or roll over relief. The higher level of property profits this year have reduced the effective rate of tax but we expect the effective tax rate to increase next year to approximately 18%.

The UK corporation tax rate reduced to 23% from April 2013. A further 2% reduction has been enacted, taking the rate to 21% from April 2014, as has an additional 1% reduction, taking the rate to 20% from April 2015.

Consolidated other comprehensive income	2014 £m	2013 £m
Deferred income tax related to items charged to other comprehensive income
Tax relief on actuarial losses	(8.7)	(5.4)
Valuation of financial instruments	0.3	0.2
Tax credit	(8.4)	(5.2)

There were no income tax or deferred tax amounts charged to changes in equity in the year ended 31 March 2014 (2013: nil).

Deferred income tax

Deferred income tax at 31 March 2014 and 2013 relates to the following:

Deferred tax liability	2014 £m	2013 £m
Accelerated depreciation for tax purposes	(28.0)	(31.7)
Financial instruments valuation	(0.1)	–
Goodwill and intangible assets	(8.0)	(9.2)
	(36.1)	(40.9)

Deferred tax asset
Government grants	1.9	3.0
Share based payments	0.1	0.1
Pensions	17.9	17.1
Financial instruments valuation	–	0.2
Other	4.8	5.9
	24.7	26.3

Net deferred tax liability	(11.4)	(14.6)

The Company has a deferred tax asset of £0.2 million at 31 March 2014 (2013: £0.4 million asset). This relates to temporary differences in respect of financial instruments valuations.

The movement on the net deferred tax balance is shown below:

	2014 £m	2013 £m
Opening net deferred tax liability	(14.6)	(69.4)
Charge to income statement	(5.2)	–
Credit to other comprehensive income	8.4	5.2
Disposal of businesses	–	47.3
Exchange impact	–	2.3
Closing net deferred tax liability	(11.4)	(14.6)

The movement on the deferred tax liability is shown below:

	Deferred tax asset/(liability)
	Goodwill and intangible assets £m	Pensions £m	Accelerated tax depreciation £m	Other temporary differences £m	Total £m
Balances at 31 March 2013	(9.2)	17.1	(31.7)	9.2	(14.6)
(Charge)/credit to income statement: continuing operations	1.2	(7.9)	3.7	(2.2)	(5.2)
Credit/(charge) to other comprehensive income	–	8.7	–	(0.3)	8.4
Balances at 31 March 2014	(8.0)	17.9	(28.0)	6.7	(11.4)
Balances at 31 March 2012	(55.4)	15.2	(37.4)	7.6	(70.0)
(Charge)/credit to income statement: continuing operations	(0.9)	(4.1)	3.2	1.8	–
Credit/(charge) to other comprehensive income	–	6.0	–	(0.2)	5.8
Disposal of businesses	44.8	–	2.5	–	47.3
Exchange impact	2.3	–	–	–	2.3
Balances at 31 March 2013	(9.2)	17.1	(31.7)	9.2	(14.6)

The Group has capital losses which arose in the UK of £137.5 million (2013: £56.3 million) that are available indefinitely for offset against future taxable gains. Deferred tax has not been recognised in respect of these losses as there is no foreseeable prospect of their being utilised. The Group has realised capital gains amounting to £27.6 million (2013: £36.9 million) for which rollover relief claims have been or are intended to be made.