Balfour Beatty, the international infrastructure group, notes that the US Government recently passed the Tax Cuts and Jobs Act which contains significant tax reform measures.
Although the reforms are subject to further guidance and interpretations from the US Authorities, the Group has made a preliminary assessment of the implications of the changes.
The reduction in US Federal corporate income tax rates from 35% to 21% will lead to a reduction in the effective tax rate on US earnings from c.40% to c.26% in 2018 and beyond.
Furthermore, as a result of this reduced tax rate on US assets the Directors’ valuation of the Investments portfolio will increase by approximately £95 million.
In addition to the above, the Group expects 2017 earnings will benefit from a non-underlying one-off non-cash credit from the revaluation of US deferred tax liabilities. Based on the net deferred tax liabilities at the end of 2016 this credit is expected to be approximately £20 million.
Further information will be provided in the Group’s 2017 full year results statement on March 14 2018.