British Energy To Pay 59% Tax Rate

by Jason Gorringe, Tax-News.com, London

18 August 2008

British Energy, the UK's largest producer of electricity, has announced that its effective corporate tax rate in 2009 will be double that of the standard rate as a result of payments associated with the decommissioning of some of its nuclear power stations.

British Energy announced to investors in its first quarter results that a tax charge of GBP39mn has been recognised in the consolidated income statement for the period, comprising a deferred tax charge of GBP18mn and a current tax charge of GBP21mn.

"The tax charge has been computed in accordance with the generally accepted practice which provides that the forecast effective tax rate on the forecast full year profits before tax and IAS 39 adjustments be applied to the actual reported profit before tax and IAS 39 adjustments for the period," the company stated.

"The forecast full year effective tax rate on this basis is 59% and this has been applied to the period’s results," it added.

The forecast full year effective tax rate of 59% is higher than the standard tax rate of 28% due to the forecast 'Cash Sweep Payment,' accrued only at the year end, and conversion asset amortisation, which are treated as operating costs, being disallowable for tax purposes, the company stated.

'Cash Sweep Payments' are made yearly by British Energy to the government-backed Nuclear Liabilities Fund, which underwrites the cost of decommissioning nuclear plant should the company's assets fall below these liabilities.

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