Ocado Group plc Annual Report for the 52 weeks ended 1 December 2013
129
Our Financials
2.2 Taxation
Accounting policies
The tax charge for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity, in which case the tax is also recognised in other comprehensive income or directly in
equity respectively.
Current taxation
Current tax is the expected tax payable on the taxable income for the period, calculated using tax rates enacted or substantively enacted by the balance
sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred taxation
Deferred tax is recognised using the balance sheet liability method on temporary differences arising between the tax base of assets and liabilities and their
carrying amount in the financial statements. Deferred tax is calculated at the tax rates that have been enacted or substantively enacted by the balance
sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred income tax is provided
on temporary differences arising on investments in subsidiaries, except where the timing of reversal of the temporary differences is controlled by the Group
and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences
can be utilised. Recognition, therefore, involves judgement regarding the prudent forecasting of future taxable profits of the business and in applying an
appropriate risk adjustment factor. The final outcome of some of these items may give rise to material profit and loss and/or cash flow variances. At the
balance sheet date management has forecast that the Group would generate future taxable profits against which existing tax losses could be relieved. The
carrying amount of deferred tax assets is reviewed at each balance sheet date.
Deferred tax assets and liabilities are offset against each other when there is a legally enforceable right to offset current taxation assets against current
taxation liabilities and it is the intention to settle these on a net basis.
2.2.1 Taxation — Income statement
Recognised in the income statement
Current tax:
UK corporation tax on profits of the period
Overseas corporation tax on profits of the period
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Total deferred tax
Income tax expense
52 weeks
ended
1 December
2013
£m
53 weeks
ended
2 December
2012
£m
—
—
—
—
—
—
—
—
0.1
0.1
—
1.7
1.7
1.8
The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to losses of the
Group as follows:
52 weeks
ended
1 December
2013
£m
Loss before tax
Effective tax credit at the UK tax rate of 23.3% (2012: 24.7%)
Effect of:
Change in UK corporation tax rate
Adjustments in respect of prior periods
Permanent differences
Difference in overseas tax rates
Tax losses for which no deferred tax asset recognised
Temporary differences on which no deferred tax recognised
Income tax charge for the period
53 weeks
ended
2 December
2012
£m
(12.5)
(2.9)
(0.6)
(0.1)
1.3
—
1.2
0.6
—
(0.2)
—
0.7
—
0.4
0.5
0.8
(0.5)
1.8
130
www.ocadogroup.com
Stock Code: OCDO
Notes to the consolidated financial statements continued
2.2.1 Taxation — Income statement continued
As enacted in Finance Act 2013, the standard rate of corporation tax in the UK changed from 24% to 23% with effect from 1 April 2013. Accordingly, the
effective rate for the period is 23.3%.
2.2.2 Taxation — Balance sheet
Movement in the deferred tax asset is as follows:
Tax losses
carry-forwards
£m
As at 27 November 2011
Effect of change in UK corporation tax rate
Tax losses recognised through the income statement
As at 2 December 2012
Effect of change in UK corporation tax rate
Tax losses recognised through the income statement
As at 1 December 2013
9.6
(0.7)
(1.0)
7.9
(1.1)
1.1
7.9
As enacted in Finance Act 2013, the standard rate of corporation tax in the UK will change to 21% from 1 April 2014 and to 20% from 1 April 2015.
Deferred tax has been provided at the rate enacted at the balance sheet date.
Movement in the unrecognised deferred tax asset is analysed below:
Tax losses
carry-forwards
£m
As at 27 November 2011
Adjustment in respect of prior periods
Effect of change in UK corporation tax rate
Potential movement in the period unrecognised through:
— Income statement
— Equity
As at 2 December 2012
Adjustment in respect of prior periods
Effect of change in UK corporation tax rate
Potential movement in the period unrecognised through:
— Income statement
— Equity
As at 1 December 2013
Accelerated
capital
allowances
£m
Derivative
financial
instruments
£m
Other
short-term
timing
differences
£m
Total
£m
60.1
0.7
(5.0)
17.8
1.3
(1.4)
0.1
—
—
—
—
—
78.0
2.0
(6.4)
0.9
—
56.7
—
(7.4)
(0.6)
—
17.1
0.7
(2.3)
—
—
0.1
—
—
0.1
—
0.1
—
—
0.4
—
74.0
0.7
(9.7)
(1.0)
—
48.3
1.5
—
17.0
—
(0.1)
—
(0.1)
—
—
0.4
(0.1)
65.3
As at 1 December 2013 the Group had approximately £279.5 million of unutilised tax losses (2012: approximately £279.5 million) available for offset
against future profits. A deferred tax asset of £7.9 million (2012: £7.9 million) has been recognised in respect of £39.6 million (2012: £34.4 million) of
such losses, the recovery of which is supported by the expected level of future profits of the Group. The recognition of the deferred tax asset is based on
forecasted operating results calculated in approved business plans and a review of tax planning opportunities. Management have concluded that there is
sufficient evidence for the recognition of the deferred tax asset of £7.9 million.
No deferred tax asset has been recognised in respect of the remaining losses on the basis that their future economic benefit is uncertain given the
unpredictability of future profit streams. All tax losses, both recognised and unrecognised, can be carried forward indefinitely.
Ocado Group plc Annual Report for the 52 weeks ended 1 December 2013
131
Our Financials
2.2.2 Taxation — Balance sheet continued
Movement in the recognised deferred tax liability is analysed below:
£m
As at 27 November 2011
Recognised through the income statement
As at 2 December 2012
Recognised through the income statement
As at 1 December 2013
(0.4)
—
(0.4)
—
(0.4)
In a prior period, the Group recognised a deferred tax liability of £0.4 million in respect of intangible assets that management deemed to qualify for
research and development corporation tax relief. After corporation tax relief, the timing of tax deductions in respect of expenditure incurred on these assets
differs to the amortisation profile of the assets giving rise to the deferred tax liability. This liability will be unwound over the useful lives of the assets.
2.3 Loss per share
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in
issue during the period, excluding ordinary shares held pursuant to the Group’s JSOS which are accounted for as treasury shares.
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential
shares. The Company has two categories of potentially dilutive shares, namely share options and shares held pursuant to the JSOS.
There was no difference in the weighted average number of shares used for the calculation of basic and diluted loss per share as the effect of all potentially
dilutive shares outstanding was anti-dilutive.
Basic and diluted loss per share has been calculated as follows:
52 weeks
53 weeks
ended
ended
1 December
2 December
2013
2012
Number of shares Number of shares
(million)
(million)
Issued shares at the beginning of the period, excluding treasury shares
Effect of share options exercised in the period
Effect of treasury shares disposed of in the period
Effect of shares issued in the period
Weighted average number of shares at the end of the period
578.3
1.4
0.3
—
580.0
Loss attributable to the owners of the Company
£m
(12.5)
£m
(2.4)
Basic and diluted loss per share
pence
(2.16)
pence
(0.46)
522.1
0.3
—
0.9
523.3
The only transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of these financial statements were the
exercise of 383,645 share options under the company ESOS scheme and 819,358 share options under the SAYE1 scheme.