Dechra Pharmaceuticals PLC

Dechra Pharmaceuticals PLC

Annual Report and Accounts for the year ended 30 June 2012

8. Income Tax Expense

2012
£'000
2011
£'000
Current tax— UK corporation tax5,0344,551
 — overseas tax at prevailing local rates2,9372,134
 — adjustment in respect of prior years126(728)
Total current tax expense8,0975,957
Deferred tax— origination and reversal of temporary differences(3,695)(1,874)
 — adjustment in respect of prior years669297
Total deferred tax expense(3,026)(1,577)
Total income tax expense in the income statement5,0714,380

The tax on the Group's profit before tax differs from the standard rate of UK corporation tax of 25.5% (2011: 27.5%). The differences are explained below:

2012
£'000
2011
£'000
Profit before taxation16,82018,514
Tax at 25.5% (2011: 27.5%)4,2895,091
Effect of:
— depreciation on assets not eligible for tax allowances8
— disallowable expenses369450
— over recovery of deferred tax on share-based payments(28)
— research and development tax credits(181)(50)
— differences on overseas tax rates(175)(165)
— adjustments in respect of prior years795(431)
— non-taxable foreign exchange losses/(gains)304(495)
— change in UK tax rate(330)
Total income tax expense5,0714,380

Tax Recognised Directly in Equity

2012
£'000
2011
£'000
Deferred tax on effective portion of changes in fair value of cash flow hedges(2)(4)
Tax recognised in statement of comprehensive income(2)(4)
Corporation tax on equity settled transactions143193
Deferred tax on equity settled transactions(77)166
Deferred tax movement on foreign currency translation(1,682)1,140
Total tax recognised in equity(1,618)1,495

The Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014. A reduction in the rate from 26% to 25% (effective from 1 April 2012) was substantively enacted on 5 July 2011, and further reductions to 24% (effective from 1 April 2012) and 23% (effective from 1 April 2013) were substantively enacted on 26 March 2012 and 3 July 2012 respectively.

This will reduce the Group's future current tax charge accordingly and further reduce the deferred tax liability at 30 June 2012 (which has been calculated based on the rate of 24% substantively enacted at 30 June 2012) by £100,000.

It has not yet been possible to quantify the full anticipated effect of the announced further 1% rate reduction, although this will further reduce the Group's future current tax charge and reduce the Group's deferred tax liability accordingly.

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