|UK corporation tax||51.1||41.6|
|Adjustments in respect of prior years||(12.2)||(2.8)|
|Total current tax charge for the year||38.9||38.8|
|Adjustments in respect of prior years||5.6||(1.4)|
|Change in tax rate||135.5||–|
|Total deferred tax charge for the year||157.5||34.0|
|Total tax charge for the year||196.4||72.8|
The deferred tax charge of £135.5 million (2019: £nil) reflects the Government's reversal of the planned reduction in the rate of corporation tax from 19 per cent to 17 per cent from 1 April 2020.
The adjustments in respect of prior years relate to agreement of prior years' UK tax matters.
The table below reconciles the notional tax charge at the UK corporation tax rate to the total charge and total effective tax rate for the year:
|Profit before tax||303.2||436.2|
|Tax at the UK corporation tax rate||57.6||19.0||82.9||19.0|
|Adjustments in respect of prior years||(6.6)||(2.2)||(4.2)||(1.0)|
|Change in tax rate||135.5||44.7||–||–|
|Net expense/(income) not taxable||9.9||3.2||(1.8)||(0.4)|
|Deferred tax rate adjustment||–||–||(4.1)||(0.9)|
|Total tax charge and effective tax rate for the year||196.4||64.7||72.8||16.7|
The prior year deferred tax rate adjustment comprises the deferred tax movement calculated at the then future tax rate from April 2020 of 17 per cent rather than the current rate of 19 per cent.
In the prior year, there is also an adjustment for items included in retained earnings, following the adoption of IFRS 15.
The increase in the net expense not taxable is mainly due to the increase in losses from our joint venture interest in Water Plus.
The table below reconciles the notional tax charge at the UK corporation tax rate to the total current tax charge for the year:
|Profit before tax||303.2||436.2|
|Profit before tax multiplied by the standard rate of UK corporation tax of 19%||57.6||82.9|
|Relief for capital allowances in place of depreciation||(82.1)||(91.0)|
|Disallowance of depreciation charged in the accounts||81.6||64.8|
|Financial transactions timing differences||11.7||1.0|
|Pension timing differences||(22.5)||(11.7)|
|Relief for capitalised interest||(7.7)||(7.1)|
|Other timing differences||2.6||4.5|
|Adjustments to tax charge in respect of prior years||(12.2)||(2.8)|
|Joint venture net losses/(profits)||7.2||(1.3)|
|Expenses not deductible/(income not taxable) for tax purposes||0.5||(1.8)|
|Depreciation charged on non-qualifying assets||2.2||1.3|
|Current tax charge for the year||38.9||38.8|
The group's current tax charge is lower than the UK headline rate of 19 per cent, primarily due to a range of adjustments which are simply timing differences between recognition of the income or expense in the accounts and in the related tax computations submitted to HMRC. These include deductions in relation to capital spend, pension timing differences, unrealised profits or losses in relation to financing and related treasury derivatives and capitalised interest.
The current year net timing differences in relation to capital spend, i.e. capital allowances less depreciation, was lower than the prior year due to the atypical bioresources asset write down in the period, together with the reduction in the rate of long life plant and machinery tax allowances from 8 per cent to 6 per cent from April 2019.
The year-on-year movement in financial transactions timing differences is sensitive to fair value movements on treasury derivatives and can, therefore, fluctuate significantly from year to year.
The current year pension timing differences of £22.5 million was higher than the prior year mainly due to the company making accelerated deficit repair contributions of £103.0 million in April 2019.
The current year adjustments to tax charge in respect of prior years of £12.2 million was higher than the prior year mainly due to the agreement of various capital allowance matters from earlier years.
The joint venture profits in the prior year are mainly our share of profits relating to AS Tallinna Vesi. In the current year, the AS Tallinna Vesi profits are offset by our share of the losses in relation to Water Plus.
|Tax on items taken directly to equity||2020|
|Deferred tax (see note 20)|
|On remeasurement gains on defined benefit pension schemes||150.0||12.4|
|Adjustments in respect of prior years on net fair value gains||2.4||–|
|On net fair value gains on credit assumptions for debt reported at fair value through|
profit and loss and cost of hedging
|Total tax charge on items taken directly to equity||159.1||13.2|
The tax adjustments taken to equity, primarily relate to remeasurement movements on the group's defined benefit pension schemes including the adjustment arising from a change in the rate at which the deferred tax liabilities are measured, from 17 per cent to 35 per cent. This change in rate reflects a revised judgement as to the most likely method by which the defined benefit pension surplus would be realised. Whereas previously it was assumed that the surplus could be realised through a reduction in future contributions, management now consider that the most likely method of realisation would be through a refund, which would be taxed at the rate applicable to refunds from a trust (currently 35 per cent).