Annual Report and Accounts 2016


John Lewis Partnership plc


117


2 Partnership performance (continued) 2.7 Taxation (continued)


2.7.2 Factors affecting tax charge in the year Taxable profit differs from profits as reported in the income statement because some items of income or expense are taxable or deductible in different years or may never be taxable or deductible. The table below shows the reconciliation between the tax charge on profits at the standard UK tax rate and the actual tax charge recorded in the income statement ignoring the effects of deferred tax timing differences. The effective tax rate is the tax charge as a percentage of Partnership profit before tax.


The tax charge for the year is higher (2015: higher) than the standard corporation tax rate of 20.17% (2015: 21.33%). The differences are explained below:


2016 £m


Profit before tax Profit before tax multiplied by standard rate of corporation tax in the UK of 20.17% (2015: 21.33%)


Effects of: Changes in tax rate


Adjustment to current tax in respect of prior years Adjustment to deferred tax in respect of prior years Depreciation on assets not qualifying for tax relief


Difference between accounting and tax base for land and buildings Differences in overseas tax rates Sundry disallowables


Other permanent differences on sale of property Total tax charge


Effective tax rate (%) 2.7.3 Deferred tax


289.8 (58.5)


6.2 2.1


(0.1)


(13.4) (1.8) 2.0


(1.0) (2.1)


(66.6) 23.0


Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences that arise when the carrying value of assets and liabilities differ between accounting and tax treatments. Deferred tax assets represent the amounts of income taxes recoverable in the future in respect of these differences, while deferred tax liabilities represent the amounts of income taxes payable in the future in respect of these differences. Here we show the movements in deferred tax assets and liabilities during the year.


Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% for deferred tax assets or liabilities expected to reverse before April 2017, 19% for deferred tax assets and liabilities expected to reverse before 1 April 2020, and 18% for those assets or liabilities expected to reverse after 1 April 2020. In the year to 31 January 2015, a tax rate of 21% was used for deferred tax assets or liabilities expected to reverse before April 2015, and 20% for those assets expected to reverse after April 2015.


The movement on the deferred tax account is shown below: Deferred tax


Opening net asset Credited to income statement


(Charged)/credited to other comprehensive income Closing net asset


2016 £m


123.8 5.8


(96.0) 33.6


2015 £m


69.1 17.0 37.7


123.8


2015 £m


194.4 (41.5)


(1.1) 2.4


(0.1)


(13.9) 1.5 2.0


(2.2) 2.0


(50.9) 26.2


It’s Your Results


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