John Lewis Partnership plc annual report and accounts 2012


6 Tax on profit on ordinary activities


Table showing Tax on profit on ordinary activities


2012 (£m) | 2011 (£m)


Analysis of tax charge
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Corporation tax – current year 67.4 | 62.2
Corporation tax – prior years (0.8) | (11.4)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Total current tax charge 66.6 | 50.8
Deferred tax – current year (18.0) | (10.7)
Deferred tax – prior years 3.8 | 5.9
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
52.4 | 46.0
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Tax (credited)/charged to equity
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Deferred tax on pension liability (48.4) | 141.4
Current tax on pension liability (6.5) | (42.0)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
(54.9) | 99.4
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––



The tax charge for the period is higher (2011: lower) than the standard corporation tax rate of 26.3% (2011: 28.0%). The differences are explained below:


Table showing Tax on profit on ordinary activities (continued)


2012 (£m) | 2011 (£m)


Profit before tax 188.6 | 173.4
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Profit before tax multiplied by standard rate of corporation tax
in the UK of 26.3% (2011: 28%) 49.6 | 48.6
Effects of:
Adjustment to current tax in respect of prior years (0.8) | (11.4)
Restatement of deferred tax balances for reduction in the corporation tax rate to 25% (14.4) | (7.2)
Depreciation on assets not qualifying for tax relief 12.8 | 12.3
Difference between accounting and tax base for land and buildings (1.9) | (2.8)
Adjustment to deferred tax in respect of prior years 3.8 | 5.9
Sundry disallowables 3.3 | 0.6
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Total tax charge 52.4 | 46.0


The Finance (No. 3) Act reduced the main rate of corporation tax from 26% to 25% from 1 April 2012. In his budget dated 21 March 2012, the Chancellor announced a further 1% reduction to the main rate of corporation tax from 25% to 24% effective 1 April 2012. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 22% by 1 April 2014. The further 1% reduction announced on 21 March 2012 and the remaining rate changes had not be substantively enacted at the end of the reporting period, and therefore are not reflected in the consolidated financial statements.


The effect of the 2% rate change on the current year (2011: 1% rate change) was to reduce the deferred tax liability by £4.0m (2011: £3.5m) with a £10.4m charge (2011: £3.7m charge) being taken directly to reserves and a £14.4m tax credit (2011: £7.2m credit) to the income statement. The impact of the rate change is expected to be of a similar amount in the year ending 26 January 2013, reflecting a 2% reduction in that year, assuming the 1% per annum reductions are substantively enacted annually and a comparable level of deferred tax. Adjustments in future years are expected to be of a lower amount to the year ended 28 January 2012, assuming the 1% per annum reductions proposed are substantively enacted annually and a comparable level of deferred tax.


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