Billions in deferred tax to boost plc earnings
Corporate tax cut will bolster earnings as early as July, as deferred tax liabilities drop
The cut in the corporate tax rate will boost company
earnings by as early as this summer, even though the new rate of 28% will only
be effective from April in 2008.
Bill Dodwell, head of tax policy of
Deloitte
, said when the Budget was enacted companies would be able to adjust their
deferred tax liabilities lower, which would release additional earnings to
income statements.
The difference between taxable and accounting profits is the reason for the
earlier-than-anticipated increase.
According to the FT
deferred liabilities arise, for example, when the cost of
buying plant and equipment is recognised for tax purposes earlier than it is for
accounting purposes.
Further reading:
Budget 2007: Is it smoke and mirrors?
SMEs count the cost of tax hikes