| 2020 £m |
2019 £m |
|
| Current tax – UK corporation tax | 3.5 | 1.0 |
| – overseas tax at prevailing local rates | 18.2 | 16.5 |
| – adjustment in respect of prior years | (0.8) | 1.6 |
| Total current tax expense | 20.9 | 19.1 |
| Deferred tax – origination and reversal of temporary differences | (14.5) | (14.0) |
| – adjustment in respect of tax rates | 1.4 | (8.0) |
| – adjustment in respect of prior years | (0.8) | (0.2) |
| Total deferred tax credit | (13.9) | (22.2) |
| Total income tax charge/(credit) in the Consolidated Income Statement | 7.0 | (3.1) |
The tax on the Group's profit before taxation differs from the standard rate of UK corporation tax of 19.0% (2019: 19.0%). The differences to this rate are explained below:
| 2020 £m |
2019 £m |
|
| Profit before taxation | 40.9 | 27.8 |
| Tax at 19.0% (2019: 19.0%) | 7.8 | 5.3 |
| Effect of: | ||
| – expenses not deductible | 1.4 | 1.2 |
| – acquisition expenses | 0.6 | 0.4 |
| – research and development related tax credits | (0.4) | (0.1) |
| – patent box tax credits | (2.7) | (2.6) |
| – other incentives | (0.2) | – |
| – impact of financing (income not taxable) | – | (0.9) |
| – share in results of associates | (0.1) | (0.1) |
| – effects of overseas tax rates | (0.3) | 0.4 |
| – movement in unrecognised deferred tax | 1.1 | – |
| – adjustment in respect of prior years | (1.6) | 1.3 |
| – change in tax rates | 1.4 | (8.0) |
| Total income tax charge/(credit) in the Consolidated Income Statement | 7.0 | (3.1) |
Recurring items in the tax reconciliation include: research and development related tax credits and patent box incentives; expenses not deductible; and the share of results in associates. The effective tax rate is 17.1% (excluding non-underlying items the effective tax rate is 20.6%).
| 2020 £m |
2019 £m |
|
| Deferred tax on employee benefit obligations | – | – |
| Deferred tax on other equity movements | 1.8 | – |
| Tax recognised in Consolidated Statement of Comprehensive Income | 1.8 | – |
| Corporation tax on equity settled transactions | 0.4 | 0.4 |
| Deferred tax on equity settled transactions | (0.3) | (1.2) |
| Total tax recognised in Equity | 0.1 | (0.8) |
The UK current tax rate used for the period is 19.0% which is the enacted rate from 1 April 2017. An announcement was made in the Budget on 11 March 2020 (which was substantively enacted on 17 March 2020) for the main rate applicable from 1 April 2020 to remain at 19.0%, removing the previously enacted reduction to 17.0%. The Dutch current tax rate used for the period is 25.0%, however, this rate is reducing to 21.7% effective from 1 January 2021 as per the Dutch Tax Plan 2020 enacted in December 2019. The tax rate applied for deferred tax purposes is based on the timing of when each individual deferred tax balance is expected to reverse in the future.
At 30 June 2020, the Group held a current provision of £5.6 million (2019: £3.8 million) in respect of uncertain tax positions. The resolution of these tax matters may take many years. The range of reasonably possible outcomes within the next financial year is £0.9 million to £7.0 million.
In October 2017 the European Commission (the Commission) opened a State Aid investigation into the Group Financing Exemption in the UK Controlled Foreign Company (CFC) rules. On 25 April 2019 the Commission issued its decision on the CFC Group Financing Exemption concluding that part of the UK measures were unlawful and incompatible instructing the UK Government to recover the State Aid. The UK Government filed an annulment appeal on 12 June 2019. In common with other UK-based international companies Dechra had financing arrangements in line with the current UK legislation. We have calculated the maximum potential State Aid claimed as £4.0 million excluding penalties and interest. Given the current position no provision has been recognised in the financial statements. We continue to monitor developments.
The Group's future tax charge, and its effective tax rate could be affected by several factors including the impact of the implementation of the OECD's Base Erosion and Profit Shifting ('BEPS') actions, and changes in applicable tax rates and legislation in the territories in which it operates.