Tuesday 18 June 2019

Barclays and Shell reveal hit from US tax reforms

Barclays and Shell said the changes will affect short-term profits as they have to recalculate deferred tax assets built up on their balance sheets.

Donald Trump (PA)
Donald Trump (PA)

By Holly Williams, Press Association Deputy City Editor

Blue chips Royal Dutch Shell and Barclays have warned of a hit to their earnings from Donald Trump’s US tax reforms despite hopes over a long-term boost from the overhaul.

The pair said the changes, which were signed into law on December 22 and will see corporation tax in the US slashed from 35% to 21%, will affect profits as they have to recalculate the deferred tax assets built up on their balance sheets.

Shell said that, while it was still assessing the impact, based on third-quarter earnings the tax reforms will see it take a charge of 2 billion US dollars (£1.5 billion) to 2.5 billion US dollars (£1.9 billion).

Shell is hoping for a long-term boost from the US tax overhaul (PA)

Barclays also announced its expected impact from the new tax laws, saying it is set to take a £1 billion charge to its 2017 accounts.

But both firms said they expect to benefit in the long run, with Shell saying the January 1 changes are set to be “favourable” for the group and its US business.

It will announce the full impact as part of its fourth-quarter and full-year results on February 1.

Barclays also said the overall tax cut is likely to “positively impact” its future earnings, although it added that the ultimate impact will also depend on the “effect of other complex provisions in the Act”.

President Trump signed the 1.5 trillion US dollar (£1.1 trillion) tax overhaul into law last Friday, cutting tax rates for businesses and also offering some temporary cuts for some individuals and families.

He has said his sweeping reforms will act as an economic rejuvenator and claimed that the steep cuts in the corporate tax rate will invigorate the economy.

Hopes of a long-term boost from the US tax reforms act as a further fillip for Shell after it recently announced it was restoring its cash dividends after more than two years in the latest sign that the industry is emerging from an extended slump.

The company confirmed in November that it was cancelling the scrip dividend programme that was in place since 2015, which gave shareholders the option to receive payments in shares or cash as it battled tough market conditions and a plunge in oil prices sparked by lower demand and a glut in supply.

Shell also increased its cash generation forecast as Brent crude prices continue to hold above 60 US dollars a barrel, having fallen as low as 27.26 in January.

And in a surprise announcement last week, Shell said it had acquired energy group First Utility in a move that will see it become a direct energy provider to 825,000 British homes.

Press Association

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