Annual Report & Accounts 2017/18

135 NI Water Annual Report and Accounts 2017/18 Statutory Accounts F1 Taxation continued Reconciliation of effective tax rate Group % Year to 31 March 2018 £000 % Year to 31 March 2017 £000 Profit for the year - 76,386 - 96,312 Total income tax expense/(credit) - 18,092 - 6,600 Profit before income tax 94,478 102,912 Income tax using the Company’s domestic tax rate 19.00 17,950 20.00 20,582 Reduction in tax rate (2.14) (2,028) (13.59) (13,984) Non-deductible expenses 0.18 176 0.13 134 Other timing differences 0.06 (60) (0.12) (125) Adjustment to prior years 0.20 192 (0.01) (7) Settlement of pre-existing relationship 1.99 1,862 - - Total - 18,092 - 6,600 Factors affecting future tax charge The Group deferred tax for 2017/18 has been calculated at the appropriate tax rate which is expected to apply when assets are realised or liabilities are settled. In preparing the Group calculation a prudent approach has been taken when considering the rate at which timing differences, including losses, will reverse. The rates enacted at the balance sheet date are 19% for the two years from 1 April 2018 to 31 March 2020, and for accounting periods thereafter 17%. From April 2017 two new pieces of legislation were introduced which may impact the future tax charge as follows: • A restriction on the use of brought forward losses may affect Group companies that were previously loss making that become profit making, with a Group profit of over £5m. This measure may result in cash tax being payable before all of the trading losses brought forward have been utilised. • The Corporate Interest Restriction legislation was introduced. The Group considers itself to be a qualifying infrastructure company for the Public Infrastructure Exemption and does not anticipate that the new rules will impact on the deductibility of interest payable by members of the Group.