RWS Annual Report 2022 web - Flipbook - Page 124
Notes to the Consolidated Financial Statements (continued)
Reconciliation of the Group’s tax charge to the UK statutory rate:
2022
£m
2021
£m
Profit before taxation
83.2
55.0
Notional tax charge at UK corporation tax rate of 19.0% (2021: 19.0%)
15.8
10.4
Effects of:
Expenses not deductible for tax purposes
Adjustments in respect of previous years
2.2
2.4
(1.6)
(4.4)
Changes in tax rates
0.1
2.0
Higher/(lower) tax rates on overseas earnings
4.0
3.4
20.5
13.8
24.6%
25.1%
Tax charge as per the income statement
Effective tax rate
Factors that may affect future tax charges
The Group’s taxation strategy is aligned to its business strategy and operational needs. The Directors are responsible
for tax strategy supported by a global team of tax professionals and advisers. RWS strives for an open and transparent
relationship with all tax authorities and are vigilant in ensuring that the Group complies with current tax legislation.
The Group’s effective tax rate for the year is higher than the UK’s statutory tax rate due to the impact of non-tax deductibility
of acquisition costs, offset by the impact of recognizing historic US Research and Development tax credits related to the period
FY16-FY21. The Group’s tax rate is also sensitive to the geographic mix of profits and reflects a combination of higher rates in
certain jurisdictions, such as Germany and Japan, a lower rate in the UK and Czech Republic with other rates that lie in between.
The majority of the adjustments in respect of prior periods relates to historic Research and Developments tax credits
recognised in the US of a £1.6m credit to deferred taxes. In addition , a £4.5m credit to current tax and £3.9m debit to
deferred tax has been recognised as an adjustment to prior periods representing the impact of the reduction of historic
uncertain tax positions recognised for transfer pricing that are outside the relevant jurisdictional statute of limitations.
Transfer Pricing
Tax liabilities are recognised when it is considered probable that there will be a future outflow of funds to a tax
authority. The methodology used to estimate liabilities is set out in Note 2. In common with other multinational
companies and given the Group has operations in 39 countries, transfer pricing arrangements are in place covering
transactions that occur between Group entities.
The Group periodically reviews its historic uncertain tax positions ('UTPs') for transfer pricing and whilst it is not
possible to predict the outcome of any pending tax authority investigations, adequate provisions are considered to
be included in the Group accounts to cover any expected estimated future settlement. In carrying out this review,
and subsequent quantification, management has made judgements, taking into account: the status of any unresolved
matters; strength of technical argument and clarity of legislation; external advice, statute of limitations and any
expected recoverable amounts under the Mutual Agreement Procedure ('MAP'). During the period the Group reduced
the provision for liabilities that are expected to no longer be sought by tax authorities on the basis that the relevant
statute of limitations has expired. In addition, UTPs related to transfer pricing were increased during the year to reflect
current period trading as well as new historic risks identified during the period.
The current tax liability of £22.7m on the balance sheet comprises £15.2m of uncertain tax provisions, although it is not
expected that these will be cash settled within 12 months of the year end date. The deferred tax liability of £58.4m on
the balance sheet is net of £6.5m of deferred tax assets relating to uncertain tax positions.
Pillar Two
On 20 December 2021, the OECD published their proposals in relation to Global Anti-Base Erosion Rules, which provide for an
internationally co-ordinated system of taxation to ensure that large multinational groups pay a minimum level of corporate
income tax in countries where they operate. In January 2022 the UK government reconfirmed its intention to introduce
legislation to give effect to the OECD proposals. The new rules are expected to take effect from 2023 onwards, however the
impact on the Group will depend on the precise rules adopted in individual countries which are not known at this time.
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RWS — Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
