Strategic report Governance Financial statements Other information SECTION 1: RESULTS FOR THE YEAR NOTES TO THE GROUP FINANCIAL STATEMENTS INCOME STATEMENT CONTINUED 1.6 Finance income 1.8 Tax Year ended Year ended Taxation 30 June 2021 30 June 2020 £m £m The tax expense represents the sum of the tax currently payable and deferred tax. The tax Interest on bank deposits 1.1 2.8 currently payable is based on taxable profit for the year. Taxable profit differs from net profit as Other finance income 0.3 reported in the income statement because it excludes items of income or expense that are taxable – 1.4 2.8 or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. 1.7 Finance costs Deferred tax is the tax expected to be payable or recoverable on differences between the carrying Year ended Year ended amounts of assets and liabilities in the financial statements and the corresponding tax bases used 30 June 2021 30 June 2020 in the computation of taxable profit, and is accounted for using the balance sheet liability method. £m £m Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred Commitment fees 0.3 0.3 tax assets are recognised to the extent that it is probable that taxable profits will be available Interest incurred on lease payables 0.7 0.7 against which deductible temporary differences can be utilised. Such assets and liabilities are not Finance costs 1.0 1.0 recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a The finance costs relate to the commitment fees paid in respect of a revolving credit facility available transaction that affects neither the tax profit nor the accounting profit. to the Group. The facility allows the Group to draw up to £75 million (2020: £75 million) and is undrawn Deferred tax liabilities are recognised for taxable temporary differences arising on investments as at 30 June 2021. The facility incurs interest charges, consisting of a margin of 0.85% plus LIBOR per in subsidiaries and associates, except where the Group is able to control the reversal of the annum when drawn. After 30th June 2021 the interest charges have been updated to reflect the temporary difference and it is probable that the temporary difference will not reverse in the change in LIBOR and are subsequently 0.85% plus SONIA. foreseeable future. Interest incurred on lease payables is in relation to the right of use assets arising due to the leases of Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is the Group accounted for under IFRS16 and the incremental borrowing rate implied in the lease. The settled or the asset is realised. Deferred tax is charged or credited in the income statement, except incremental borrowing rate for each lease is considered based on the relevant terms of the lease when it relates to items charged or credited directly to equity, in which case the deferred tax is also taking into account factors such as length of lease, the location and economic factors impacting the dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable asset and the credit rating of the Group company entering into the lease. The rates range between right to set off current tax assets against current tax liabilities and when they relate to income taxes 2.5% and 4.4%, with a weighted average incremental borrowing rate of 2.8%. levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. 147 Hargreaves Lansdown Report and Financial Statements 2021