liabilities and deferred tax assets within debtors. Deferred tax assets and deferred tax liabilities are offset only if: • the Group has a legally enforceable right to set off current tax assets against current tax liabilities; and • the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable enitities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously. ix Value Added Tax (VAT) A large proportion of the Group’s income comprises rental income which is exempt from VAT, and VAT incurred in relation to this income cannot be recovered. A partial exemption claim arises as the Group charges VAT on some of its income and is able to recover some of the VAT incurred on costs relating to this taxable income. Expenditure is therefore shown inclusive of VAT. Recoverable VAT arising from the partially exempt activities is credited to the statement of comprehensive income. The balance of VAT recoverable or payable is included as a current asset or liability in the statement of financial position. x Leases As Lessee Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group. All other leases are classified as operating leases. Assets held under finance leases are recognised initially at the fair value of the leased asset (or, if lower, the present value of minimum lease payments) at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation using the effective interest method so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are deducted in measuring profit or loss. Assets held under finance leases are included in tangible fixed assets and depreciated and assessed for impairment losses in the same way as owned assets. Rentals payable under operating leases are charged to income and expenditure on a straight-line basis over the lease term, unless the rental payments are structured to increase in line with expected general inflation, in which case the Group recognises annual rent expense equal to amounts owed to the lessor. The aggregate benefit of lease incentives is recognised as a reduction to the expense recognised over the lease term on a straight-line basis. As Lessor Upon completion of properties the development costs incurred under a Private Finance Initiative (PFI) contract are converted to a finance lease debtor. This debtor represents the total amount outstanding under the lease agreements less unearned income. Finance lease income, having been allocated to accounting periods to give a constant periodic rate of return on the net investment, is included in turnover.
recognised in the statement of comprehensive income. Re-measurement of the net defined benefit liability/asset is recognised in other comprehensive income in the period in which it occurs. viii Taxation Anchor Hanover Group, the entity, is considered to have passed the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it meets the definition of a charitable entity for UK corporation tax purposes. Accordingly, the charity is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 Corporation Tax Act 2010 or Section 256 of the Taxation of Charitable Gains Act 1992, to the extent that such income or gains are applied exclusively to charitable purposes. The entity’s subsidiaries do not have charitable status and their gains or losses are subject to taxation. Tax on the surplus or deficit for the year comprises current and deferred tax. Tax is recognised in the income and expenditure reserve except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. If and when all conditions for retaining tax allowances for the cost of a fixed asset have been met, the deferred tax is reversed. Deferred tax is recognised when income or expenses from a subsidiary or associate have been recognised, and will be assessed for tax in a future period, except where: • the Group is able to control the reversal of the timing difference; and • it is probable that the timing difference will not reverse in the foreseeable future. A deferred tax liability or asset is recognised for the additional tax that will be paid or avoided in respect of assets and liabilities that are recognised in a business combination. The amount attributed to goodwill is adjusted by the amount of deferred tax recognised. Deferred tax is calculated using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference. With the exception of changes arising on the initial recognition of a business combination, the tax expense / (income) is presented either in income and expenditure, other comprehensive income or equity depending on the transaction that resulted in the tax expense / (income). Deferred tax liabilities are presented within provisions for
74 Anchor Hanover Group Annual Report & Financial Statements 2024
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