Tax (Tables)

12 Months Ended

Dec. 31, 2019

Text block [abstract]

Summary of Tax on Profit

Tax on profit

	2019 $m			2018 Restated $m			2017 Restated $m
Income tax
UK corporation tax at 19.00% (2018: 19.00%, 2017: 19.25%):
Current period		5			10			10
Adjustments in respect of prior periods		13			4			(2	)
		18			14			8
Foreign tax:
Current period		154			95			210
Benefit of tax reliefs on which no deferred tax previously recognised		(2	)		(1	)		(13	)
Adjustments in respect of prior periods		(11	)		(13	)		2
		141			81			199
Total current tax		159			95			207
Deferred tax:
Origination and reversal of temporary differences		11			39			(8	)
Changes in tax rates and tax lawsa		2			1			(56	)
Adjustments to estimated recoverable deferred tax assetsb		(2	)		(2	)		(9	)
Adjustments in respect of prior periods		(14	)		(1	)		(16	)
Total deferred tax		(3	)		37			(89	)
Total income tax charge for the year		156			132			118
Further analysed as tax relating to:
Profit before exceptional itemsc		176			159			203
Exceptional items:
Tax on exceptional items (note [6])		(20	)		(22	)		2
Exceptional tax (note [6])		—			(5	)		(87	)
		156			132			118

a  In 2017, predominantly reflects a change in US tax rates following significant US tax reforms.

b  Represents a re-assessment of the recovery of recognised and off-balance sheet deferred tax assets in line with the Group’s profit forecasts.

c  Includes $113m (2018: $93m, 2017: $157m) in respect of US taxes.

Summary of Reconciliation of Tax Charge Including Gain on Disposal of Assets

	Totala									Before exceptional items and System Fundb
	2019 %			2018 Restated %			2017 Restated %			2019 %			2018 Restated %			2017 Restated %
Reconciliation of tax charge
UK corporation tax at standard rate		19.0			19.0			19.3			19.0			19.0			19.3
Tax credits		(0.8	)		(0.5	)		(0.5	)		(0.6	)		(0.3	)		(0.5	)
System Fundc		1.1			5.0			0.9			(0.5	)		(0.5	)		(0.4	)
Impairments		1.7			—			—			—			—			—
Other permanent differences		1.3			0.6			0.8			0.8			0.3			0.6
Non-recoverable foreign taxesd		3.2			0.7			0.3			2.4			0.5			0.3
Net effect of different rates of tax in overseas businessese		6.7			4.6			14.6			5.5			3.7			13.9
Effects of changes in tax rates resulting from significant US tax reform		—			—			(8.7	)		—			—			—
Release of provision for taxation on unremitted earnings following significant US tax reform		—			—			(7.8	)		—			—			—
Transition tax liability arising from significant US tax reform		—			—			4.8			—			—			—
Effect of other changes in tax rates and tax laws		(0.4	)		0.3			0.3			(0.3	)		0.2			0.3
Benefit of tax reliefs on which no deferred tax previously recognised		(0.4	)		(0.4	)		(1.9	)		(0.3	)		(0.3	)		(1.8	)
Effect of adjustments to estimated recoverable deferred tax assets		(0.4	)		0.1			(1.4	)		(0.3	)		0.1			(1.3	)
Adjustment to tax charge in respect of prior periods		(2.2	)		(2.0	)		(2.6	)		(1.9	)		(1.0	)		(1.1	)
a
		28.8			27.4			18.1			23.8			21.7			29.3

a  Calculated in relation to total profits including exceptional items and System Fund.

b  Calculated in relation to profits excluding exceptional items and System Fund earnings.

c  The System Fund is, in general, not subject to taxation.

d  In 2018, IHG recognised a benefit in respect of foreign tax credits in the US that were carried back against 2017 tax. In 2019, this carry back benefit is not available which has led to an increase in irrecoverable tax by 1.8 percentage points on to the underlying rate before exceptional items and System Fund. These credits are disclosed within unrecognised deferred tax.

e  Before exceptional items and System Fund includes 4.9 percentage points  (2018: 4.2 percentage points, 2017: 13.3 percentage points) driven by the relatively high US federal tax rate. 

Reconciliation Between Total Tax Rate and Tax Rate Before Exceptional Items and System Fund

A reconciliation between total tax rate and tax rate before exceptional items and System Fund is shown below:

	2019						2018 Restated						2017 Restated
	Profit $m		Tax $m		Rate %		Profit $m		Tax $m		Rate %		Profit $m			Tax $m			Rate %
Group income statement		542		156		28.8		482		132		27.4		653			118			18.1
Adjust for:
Exceptional items and tax (note [6])		148		20				104		27				(4	)		85
System Fund		49		—				146		—				34			—
Other		—		—				—		—				—			(3	)
		739		176		23.8		732		159		21.7		683			200			29.3

Summary of Reconciliation of Tax Paid to Total Tax Charge in Income Statement

A reconciliation of tax paid to the total tax charge in the Group income statement is as follows:

	2019 $m			2018 $m			2017 $m
Current tax charge in the Group income statement		(159	)		(95	)		(207	)
Current tax credit in the Group statement of comprehensive income		2			1			—
Current tax credit taken directly to equity		4			8			12
Total current tax charge		(153	)		(86	)		(195	)
Movements to tax contingencies within the Group income statementa		3			(4	)		(3	)
Timing differences of cash tax paid and foreign exchange differences		9			22			26
Tax paid per cash flow		(141	)		(68	)		(172	)

a  Tax contingency movements are included within the current tax charge but do not impact cash tax paid in the year.

Summary of Deferred Tax

Deferred tax

	Property, plant, equipment and software $m			Other intangible assets and contract assets Restated $m			Application fees and contract costs $m			Deferred gains on loan notes $m			Deferred gains on investments $m			Losses $m			Employee benefits $m			Undistributed earnings of subsidiaries $m			Other short-term temporary differencesa Restated $m			Total Restated $m
At 1 January 2018		(98	)		(2	)		25			(34	)		(54	)		40			20			—			86			(17	)
Group income statement		(26	)		(8	)		4			(1	)		(2	)		(4	)		—			(2	)		2			(37	)
Assets of businesses acquired		4			(11	)		—			—			—			—			—			—			10			3
Group statement of comprehensive income		—			—			—			—			—			—			(2	)		—			(2	)		(4	)
Group statement of changes in equity		—			—			—			—			—			—			—			—			(5	)		(5	)
Exchange and other adjustments		—			—			—			—			—			(1	)		—			—			—			(1	)
At 31 December 2018		(120	)		(21	)		29			(35	)		(56	)		35			18			(2	)		91			(61	)
Group income statement		—			1			(2	)		1			(2	)		(9	)		—			2			12			3
Assets of businesses acquired		—			—			—			—			—			—			—			—			2			2
Group statement of comprehensive income		—			—			—			—			—			—			1			—			(1	)		—
Exchange and other adjustments		1			1			—			—			—			1			1			—			—			4
At 31 December 2019		(119	)		(19	)		27			(34	)		(58	)		27			20			—			104			(52	)

a  Primarily relates to provisions, accruals, share-based payments, right-of-use assets, lease liabilities and contingent purchase consideration.

Summary of Deferred Taxes by Territory

The closing balance is further analysed by key territory as follows:

	Property, plant, equipment and software $m			Other intangible assets and contract assets $m			Application fees and contract costs $m			Deferred gains on loan notes $m			Deferred gains on investments $m			Losses $m		Employee benefits $m		Undistributed earnings of subsidiaries $m		Other short-term temporary differences $m		Total $m
UK		6			5			(1	)		—			—			21		4		—		20		55
US		(125	)		(18	)		33			(34	)		(58	)		1		16		—		74		(111	)
Other		—			(6	)		(5	)		—			—			5		—		—		10		4
		(119	)		(19	)		27			(34	)		(58	)		27		20		—		104		(52	)

Summary of Deferred Tax Balance After Offset of Assets and Liabilities

The analysis of the deferred tax balance after considering the offset of assets and liabilities within entities where there is a legal right to do so is as follows:

	2019 $m			2018 Restated $m
Analysed as:
Deferred tax assets		66			63
Deferred tax liabilities		(118	)		(124	)
		(52	)		(61	)

Summary of Unrecognised Deferred Tax Position

The total unrecognised deferred tax position is as follows:

	Gross				Unrecognised deferred tax
	2019 $m		2018 Restated $m		2019 $m		2018 Restated $m
Revenue losses		413		448		65		67
Capital losses		541		516		95		90
Total losses		954		964		160		157
Foreign tax credits		13		—		13		—
Leases		25		25		7		7
Othera		2		24		1		7
		994		1,013		181		171

a Primarily relates to costs incurred in prior years for which relief has not been obtained.    

Summary of Unrecognized Deferred Tax Based on Expiry Date

There is no expiry date to any of the above unrecognised assets other than for the losses and foreign tax credits as shown in the table below:

	Gross				Unrecognised deferred tax
	2019 $m		2018 $m		2019 $m		2018 $m
Expiry date:
2020		2		—		—		—
2021		31		28		6		6
2022		10		10		2		2
2023		2		1		—		—
2024		4		4		1		—
2025		91		92		20		21
After 2025		24		46		17		3