16. Tax charge

(a) Analysis of tax charge in the Group income statement

(b) Tax reconciliations

(i) Reconciliation of the tax charge

As the Group is subject to the tax rates of more than one country, it has chosen to present its reconciliation of the tax charge using the main rate of corporation tax in the UK. The effective rate of tax for each year based on profit before tax is higher (2021: higher) than the main rate of corporation tax in the UK, with the differences explained in note 16(c).

Local taxes primarily comprise US state taxes.

(ii) Reconciliation of the tax charge to the Benchmark tax charge

(c) Factors that affect the tax charge

Prior year adjustments reflect the net movement on historical tax positions, including adjustments for matters that have been substantively agreed with local tax authorities, and adjustments to deferred tax assets based on latest estimates and assumptions.

Expenses not deductible include charges in respect of uncertain tax positions, the impairment of goodwill, financing fair value remeasurements not allowable for tax purposes, and losses on the disposal of businesses which are not subject to tax relief.

The Group’s tax rate reflects its internal financing arrangements in place to fund non-UK businesses.

In addition, in the normal course of business, the Group has a number of open tax returns with various tax authorities with whom it is in active dialogue. At 31 March 2022 the Group held current provisions of US$293m (2021: US$350m) in respect of uncertain tax positions.

During FY22, Experian was in discussions with the US Internal Revenue Service and Her Majesty’s Revenue and Customs to seek clarity on Experian’s transfer pricing and financing related issues. The net decrease in recognised provisions during the year was driven by agreement of open tax issues in North America and adjustments to our provisions on the utilisation of historical UK tax losses.

Liabilities relating to these open and judgmental matters are based on an assessment as to whether additional taxes will be due, after taking into account external advice where appropriate. The resolution of these tax matters may take many years. While the timing of developments in resolving these matters is inherently uncertain, the Group does not expect to materially increase its uncertain tax provisions in the next 12 months, however if an opportunity arose to resolve the matters for less than the amounts provided, a settlement may be made with a corresponding reduction in the provision.

(d) Other factors that affect the future tax charge

The Group’s tax charge will continue to be influenced by the profile of profits earned in the different countries in which the Group’s subsidiaries operate. Continued focus on tax reform is expected through 2022, 2023 and future years driven by the OECD’s project to address the tax challenges arising from the digitalisation of the economy (including the proposed minimum tax legislation). Experian are continuing to analyse the implications for the Group from these Model Rules and will determine the outcome once the final relevant legislation is available. This may result in significant changes to established tax principles and an increase in tax authority disputes. In turn, this could adversely affect Experian’s effective tax rate or could result in higher cash tax liabilities.

The main rate of UK corporation tax is 19% and will increase to 25% from 1 April 2023. This will have a consequential effect on the Group’s future tax charge.