31 Deferred tax assets and liabilities

31.1 Recognized deferred tax assets and liabilities

 

 

 

 

 

 

 

 

 

€ million

2017

Acquisition/ disposals

R&D adjustment

Current year movement

OCI – cash flow hedges

OCI – pensions

Effect of movements in exchange rate

2018

Intangible assets

-73

0

0

21

0

0

0

-52

Property, plant and equipment

-20

0

0

-1

0

0

0

-21

Inventories

166

0

0

34

0

0

0

200

Trade and other receivables

33

0

0

3

0

0

0

36

Employee benefits

52

0

0

0

0

-4

0

48

Provisions

15

0

0

-12

0

0

0

3

Other short-term liabilities

-264

0

0

-12

52

0

2

-222

Net lease assets/liabilities

0

0

0

0

0

0

0

0

Unused tax losses

382

0

0

-90

0

0

0

291

Unused tax credits

371

0

65

2

0

0

0

438

Total net deferred tax assets/liabilities (-)

662

0

65

-55

52

-4

1

721

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

€ million

2016

Acquisition/ disposals

R&D adjustment

Current year movement

OCI – cash flow hedges

OCI – pensions

Effect of movements in exchange rate

2017

Intangible assets

-111

0

0

32

0

0

6

-73

Property, plant and equipment

-18

0

0

-3

0

0

1

-20

Inventories

251

0

0

-85

0

0

0

166

Trade and other receivables

54

2

0

-22

0

0

-1

33

Employee benefits

72

0

0

0

0

-18

-2

52

Provisions

39

0

0

-24

0

0

0

15

Other short-term liabilities

-264

0

0

69

-47

0

-22

-264

Net lease assets/liabilities

0

0

0

0

0

0

0

0

Unused tax losses

593

0

0

-205

0

0

-6

382

Unused tax credits

327

0

41

4

0

0

-1

371

Total net deferred tax assets/liabilities (-)

943

2

41

-234

-47

-18

-25

662

 

 

 

 

 

 

 

 

 

Total deferred tax assets of € 721 million have been recognized as at 31 December 2018. Based upon the level of past taxable income and projected future taxable profits over the periods in which the deductible temporary differences are estimated to reverse, the Group believes it is probable that the benefits of the recognized deferred tax assets will be realized.

The Group saw an overall increase of the deferred tax recognized, in spite of the substantial tax loss carry-forward utilization. This is driven by the regular movement on UCB’s balance sheet items and the outcome of the U.S. tax reform.

Tax Reforms

Enactment and implementation of tax law changes in the U.S. were assessed and required changes were implemented.

R&D Tax Credits

The group recorded increased deferred tax assets on R&D tax credits. The total deferred tax asset in respect of R&D tax credits at year end is € 438 million (2017: € 372 million) which will result in an actual cash tax benefit in future periods.

Deferred tax assets on losses

UCB has seen a substantial utilization of tax losses carried forward, partially compensated by a decrease of deferred tax liabilities. A deferred tax asset of € 291 million (2017: € 382 million) has been recognized in respect of tax losses carried forward totaling € 1.33 billion (2017: € 1.58 billion) as the Group has concluded that the relevant entities will continue to generate taxable profits in the foreseeable future against which these losses can be used. These losses have arisen in a number of jurisdictions in which UCB operates and do not expire. This period has seen no further recognition of losses and tax credits previously unrecognized. Undiscounted forecasts have been used to assess the availability of future taxable profits.

31.2 Unused tax losses

As of 31 December 2018, the Group also had € 2 506 million (2017: € 2 013 million) of gross unused tax losses for which no deferred tax asset is recognized in the balance sheet. These tax losses carried forward do not expire.

Based on current forecasts and current legislation, the majority of these losses is expected to be fully utilized within the next 10 years, but it has been decided to not recognize a deferred tax asset on these losses for now given the long-term nature of these forecasts.

31.3 Temporary differences for which no deferred tax asset or deferred tax liability is recognized

Deferred tax assets are recognized on temporary differences carried forward that represent income likely to be realized in the foreseeable future. Deferred tax assets amounting to € 392 million (2017: € 497 million) in respect of intangible assets have not been recognized in view of the uncertain character of the recovery.

No deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries as 100% participation exemption is available for any future equity upstream.

There is an additional unrecognized deferred tax liability of € 220 million (2017: € 229 million) in respect of an internal reorganization which occurred in 2014. The tax liability will only materialize on disposal of the relevant asset, an event which is controlled by UCB and for which there are no plans in the foreseeable future.

31.4 Deferred tax directly recognized in OCI

 

 

 

€ million

2018

2017

Deferred tax on pensions

-3

-18

Deferred tax on effective portion of changes in fair value of cash flow hedges

53

-47

Deferred tax directly recognized in OCI

50

-65