annington annual rep 2019-web - Page 58



Financial statements | Notes to the financial statements
Notes to the financial statements
9. TAXATION (CONTINUED)
Deferred tax (continued)
Deferred tax assets and liabilities are offset where the Group is
permitted to do so. The following is an analysis of the deferred
tax balances:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
2019
£’000
2018
£’000
211,575
217,385
(874,881)
(791,946)
(663,306)
(574,561)
At the balance sheet date, the Group has unused tax losses
of £1,231.8 million (2018: £1,272.3 million) available for offset
against future profits. A deferred tax asset of £209.9 million
has been recognised in respect of these losses
(2018: £216.3 million).
present condition, the property is being actively marketed, and
management is committed to the sale, which is expected to
qualify as a completed sale within 12 months from the date of
classification.
Investment properties held for sale continue to be measured
in accordance with the accounting policy for investment
properties.
2019
Carrying value at
1 April
Additions - capital
expenditure
Disposals
Transfer to
investment
properties held
for sale
Deferred tax balances at 31 March 2019 are measured at
17% (2018: 17%).
Unrealised property
revaluation gains/
(losses)
Investment properties comprise property that is held to
earn rentals or for capital appreciation or both. Investment
properties are measured initially at cost, including transaction
costs. Transaction costs include transfer taxes and other
professional fees. Subsequent to initial recognition, investment
properties are recognised at the carrying value at balance
sheet date, which is the fair value, adjusted for related
provisions that are disclosed separately on the balance sheet.
The fair value is determined annually by professionally qualified
external valuers on a portfolio basis such that individual
property calculations are not performed. Changes in the
carrying value are included in the income statement in the
period in which they arise. No depreciation is provided in
respect of investment properties.
Where specific investment properties are expected to sell
within the next 12 months, their carrying value is classified as
held for sale within current assets.
Investment properties are transferred to investment properties
held for sale if their carrying amount is intended to be
recovered through a sales transaction rather than continuing
use. This condition is regarded as met if the sale is highly
probable, the property is available for immediate sale in its
Total carrying value
at 31 March
2018
Total
£’000
7,102,224
2,711
7,104,935
Additions - capital
expenditure
-
86,539
(10,873)
(2,711)
(13,584)
(2,357)
481,378
7,656,911
Investment
properties
£’000
2,357
(132)
2,225
Investment
properties
held for sale
£’000
-
481,246
7,659,136
7,563,065
7,428
Total
£’000
7,570,493
-
39,438
(15,710)
(7,428)
(23,138)
(2,567)
2,567
-
Unrealised property
revaluation (losses)/
gains
(482,002)
144
(481,858)
Total carrying value
at 31 March
7,102,224
2,711
7,104,935
Transfer to
investment
properties held
for sale
350,809
335,915
92,318
7,357
7,216,009
6,761,663
7,659,136
7,104,935
2019
£’000
2018
£’000
Reconciliation of fair value/market value to carrying value:
Market value as estimated by the
external valuer
7,619,127
7,065,272
Add: amounts included in utilities
provision (Note 18)
40,009
39,663
Carrying value for financial
reporting purposes
7,659,136
Property rental income from
investment properties:
7,104,935
IFRS requires the market value of investment properties be
adjusted for assets or liabilities recognised separately on the
balance sheet. Due to the method used by the external valuer
in calculating market value, when arriving at carrying value,
the Group has adjusted the market valuation of investment
properties to exclude the utilities provision (Note 18).
All leasehold properties leased by the MoD are maintained by
and remain entirely under their control. The identification of
surplus properties and the timing of their release to the Group
is entirely at the discretion of the MoD and, upon receiving not
less than six months’ notice, the Group is obliged to accept
any properties declared surplus.
Future minimum rents receivable under non-cancellable
operating leases are disclosed in Note 28.
2019
£’000
2018
£’000
196,793
193,067
(1,178)
(1,838)
-
1,379
(2,831)
(3,701)
(4,009)
(4,160)
Property rental expenses:
Refurbishment costs
Dilapidations recovered from tenants
Rental running expenses

39,438
Disposals
Long leaseholds
Very long leaseholds (over 900 years)
86,539
2018
£’000
The carrying value of investment properties
and investment properties held for sale comprises:
Freehold
Valuation
Carrying value at
1 April
As at 31 March 2019 there were 6 (2018: 11) investment
properties classified as held for sale, with disposal expected
within the next 12 months.
2019
£’000
Valuation
No deferred tax liabilities are recognised on temporary
differences associated with investments in subsidiaries and
interests in joint ventures for the current and preceding year
in accordance with the accounting policy.
10. INVESTMENT PROPERTIES
ACCOUNTING POLICY
Investment
properties
£’000
Investment
properties
held for sale
£’000
Properties would have been included on an historical cost basis
at £1,491.2 million (2018: £1,421.0 million).

Refurbishment costs are incurred where significant repairs are
required to bring vacated properties back up to tenantable
standard. Dilapidations recovered from tenants are used to
defray these costs.
In the previous year Site Review costs were included within
rental running costs. These have since been reclassified to
be disclosed separately within the financial statements,
reducing rental running expenses for 2018 by £1.5 million,
from £5.2 million to £3.7 million. Refer to Note 5 for
information on the reclassification of Site Review costs.
All of the Group’s investment properties generated rental
income in the current and prior year, with the exception of the
plots and infill areas that are held for future development.
The Group’s freehold and long leasehold interests in its
investment properties were valued as at 31st March 2019 by
an External Valuer, Martin Angel FRICS of Allsop Valuations
Limited (“AVL”), a subsidiary of Allsop LLP (“Allsop”). The
valuation, which was prepared on a portfolio basis, was subject
to the existing leases, underleases and tenancies as advised
but otherwise with vacant possession.
The valuer’s opinion in relation to the Retained Estate was
derived primarily using a discounted cash flow approach,
supplemented by comparable recent market transactions on
arm’s length terms in relation to the Surplus Estate. The valuer’s
opinion in relation to the assured short-hold and other bulk
tenancies in the Group was derived with reference to recent
market transactions on arm’s length terms. Both of these were
undertaken in accordance with the requirements of IFRS 13,
Fair Value Measurement and the requirements of the RICS
Valuation - Global Standards 2017, as amended, except where
it was not, in practical terms, feasible to comply due to the
large number of properties involved.

58 | Annington Limited Annual Report & Accounts 2019
Annington Limited Annual Report & Accounts 2019 | 59

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