(Preliminary Results Announcement) PDF 0.71MB - Cairn Energy PLC

5.4 Taxation on Loss (continued)c) Factors that may affect future corporation tax chargesAt 31 December 2012, Cairn had losses of approximately $64.8m (2011: nil) available for offset against future RingFence trading profits chargeable to UK Corporation Tax. In addition there are surplus management expenses of$319.6m (2011: $324.1m) and non-trade deficits of $0.7m (2011: $66.5m) available for offset against future investmentincome. Under UK tax law, tax losses may generally be carried forward indefinitely.At 31 December 2012, Cairn had Norwegian tax losses carried forward of $7.3m (2011: nil), all of which is relievable atthe ordinary Norwegian corporate tax rate of 28%, and $3.2m (2011: nil) is also relievable at the additional specialNorwegian tax rate of 50% applicable to certain profits from oil and gas activities. These losses can be carried forwardindefinitely for use against future profits.Note 5.4(d) provides further information in connection with losses recognised for deferred tax purposes.As at 31 December 2012, it is anticipated that the Group will be eligible for Field Allowances in the UK which willreduce the Ring Fence profits chargeable to Supplementary Charge. Field Allowances will only be granted whenDECC approves a field development plan and claimed when production commences.d) Reconciliation to deferred tax liabilitiesGroup$mAt 1 January 2011 -Initial recognition of deferred tax provision on available-for-salefinancial asset (273.9)Deferred tax credit on movement in fair value of available-for-salefinancial assets recognised in other comprehensive income 19.8At 1 January 2012 (254.1)Deferred tax on fair value arising from business combinations (493.7)Credit to the income statement 227.5Deferred tax credit on movement in fair value of available-for-salefinancial assets recognised in other comprehensive income (9.7)Exchange difference arising (0.9)At 31 December 2012 (530.9)As at 31 December 2012, the Group had a deferred tax asset of $0.3m (2011: $0.3m) in respect of future UKcorporation tax deductions for equity-based remuneration. This asset has not been recognised as it is not consideredprobable that there will be sufficient profits to utilise these tax deductions.As at the Balance Sheet date, a deferred tax asset was not recognised in respect of UK tax losses of $320.3 m (2011:$390.6m) (Company: $156.3m; 2011: $217.4m) where it is not probable that they can be utilised in future periods. UKtax losses of $73.4m (2011: nil) (company: nil; 2011: nil) attributable to UK Ring Fence trading activity, and Norwegiantax losses of $7.3m (2011: nil) have been offset against the deferred tax liability arising from business combinationsduring the year.34