NCC Group plc Annual Report 2022

9 Taxation continued Reconciliation of effective tax rate

2022 £m

2021 £m

31.0

Profit before taxation

14.8

5.9

Current tax using the UK corporation tax rate of 19% (2021: 19%)

2.8

Effects of: Items not deductible/(assessable) for tax purposes Adjustment to tax charge in respect of prior periods

0.5 0.1

(0.5) (0.3)

(1.1) (0.2)

Impact of prior year US R&D tax credits Impact of current year US R&D tax credits Differences between overseas tax rates

1.9

(0.3)

1.7 1.2

0.7 0.1 0.4

Movements in temporary differences not recognised

(0.1)

Movement in tax rate

Total tax expense

8.0

4.8

Current and deferred tax recognised directly in equity was a debit of £0.3m (2021: credit £0.3m). In the March 2021 Budget the UK government announced that legislation will be introduced in the Finance Bill 2021 to increase the main rate of UK corporation tax from 19% to 25%, effective 1 April 2023. This rate was substantively enacted on 24 May 2021 and therefore the deferred tax balances as at 31 May 2021 and 31 May 2022 are generally measured at a rate of 25%. Tax uncertainties The tax expense reported for the current year and prior year is affected by certain positions taken by management where there may be uncertainty. The most significant source of uncertainty arises from claims for US R&D tax credits relating to historical periods. Uncertainty arises as a result of a degree of uncertainty concerning interpretation of US legislation and because the statute of limitations has not expired. For the periods ended 31 May 2017 to 31 May 2022, the aggregate net current tax benefit to the Income Statement relating to the US R&D tax credits is £4.0m (2021: £2.7m). As at 31 May 2022, the gross deferred tax asset relating to the US R&D tax credits is £0.5m (2021: £1.0m), although due to the uncertainty a partial provision of £0.3m (2021: £0.6m) has been made against this asset. The gross cumulative amount of US R&D tax credits amounts to £9.3m (2021: £8.2m) and net cumulative amount of US tax credits amounts to £4.2m (2021: £3.1m), giving rise to a cumulative provision of £5.1m (2021: £5.1m). The cumulative provision of £5.1m comprises a deferred tax element (£0.3m) relating to tax credits as yet unutilised against US tax and a current tax element (£4.8m) relating to utilised tax credits. The latter provision will unwind as the statute of limitation windows expire for claims made in particular periods. The provision relating to utilised tax credits of £4.8m is expected to unwind as follows: FY23: £1.6m, FY24: £1.2m, FY25: £0.9m, FY26: £0.8m and FY27: £0.3m.

10 Dividends

2022 £m

2021 £m

14.4

Dividends paid and recognised in the year

13.0

4.65p 3.15p

Dividends per share paid and recognised in the year Dividends per share proposed but not recognised in the year

4.65p 3.15p

The proposed final dividend for the year ended 31 May 2022 of 3.15p per ordinary share (approximately £9.8m) was approved by the Board on 6 September 2022 and will be paid on 11 November 2022, to shareholders on the register at the close of business on 14 October 2022. The ex-dividend date is 13 October 2022. The dividend will be recommended to shareholders at the AGM on 2 November 2022. The dividend has not been included as a liability as at 31 May 2022. The payment of this dividend will not have any tax consequences for the Group. Dividend policy Dividends are the way the Company makes distributions from the Company’s distributable reserves to shareholders. The Board decides the level of the dividend with each half-year reporting period (i.e. 30 November and 31 May). If an interim or final dividend is declared, the Company pays the dividend approximately eight weeks after the results announcement. A dividend is paid for each share, so the amount you receive depends on the number of shares you own. The Company currently continues to pay a dividend equal to that paid in the prior years as the Board is conscious of the need to invest in initiatives to support longer-term growth and service the debt profile following the recent acquisition.

NCC Group plc — Annual report and accounts for the year ended 31 May 2022

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