| 23 | Deferred tax |
Deferred tax is calculated in full on temporary differences under the liability method using tax rates applicable in the tax jurisdictions where the tax asset or liability would arise.
The movement on the deferred tax account is as shown below:
| 2017 | 2016 | 2015 | ||||||||||
| £’000 | £’000 | £'000 | ||||||||||
| Liability at 1 January | - | 6,547 | 354 | |||||||||
| Arising on business combination | - | - | 6,191 | |||||||||
| Credited to income
on impairment and amortisation of intangibles |
- | (5,509 | ) | - | ||||||||
| Credited to income statement | - | (1,740 | ) | (131 | ) | |||||||
| Foreign exchange gain | - | 702 | 133 | |||||||||
| Liability at 31 December | - | - | 6,547 | |||||||||
The movement on the deferred tax account in 2017 is Nil as the net credit arising on the amortisation of intangible assets and other timing differences has been matched by a reduction in the deferred tax asset recognised on the losses offsetting the liability remaining.
A deferred tax liability has arisen due to deferred tax on intangible assets acquired in 2015.
An intangible asset was impaired in the financial statements for the year ended 31 December 2016 by £11.4m which resulted in a £4.6m tax credit being recognised in the income statement.
Unused tax losses carried forward, subject to agreement with local tax authorities, were as follows:
Gross losses
|
Unrecognised deferred tax asset |
|||||||
| £’000 | £’000 | |||||||
| 31 December 2015 | 23,286 | 4,191 | ||||||
| 31 December 2016 | 26,956 | 5,049 | ||||||
| 31 December 2017 | 38,377 | 6,639 | ||||||
With the exception of the £2.6m (2016: £3.7m: 2015: £1.6m) deferred tax asset which qualifies for offset against the deferred tax liabilities arising on the acquisitions of Midatech Pharma (Wales) Limited and Midatech Pharma US, the remaining potential deferred tax asset of £9.5m (2016: £8.1m) has not been provided in these accounts due to uncertainty as to the whether the asset would be recovered.
Details of the deferred tax liability are as follows:
| 2017 | Asset | Liability | Net | |||||||||
| £’000 | £’000 | £'000 | ||||||||||
| Business Combinations | 2,599 | (2,599 | ) | - | ||||||||
| 2016 | Asset | Liability | Net | |||||||||
| £’000 | £’000 | £'000 | ||||||||||
| Business Combinations | 3,668 | (3,668 | ) | - | ||||||||
| 2015 | Asset | Liability | Net | |||||||||
| £’000 | £’000 | £'000 | ||||||||||
| Business Combinations | 1,625 | (8,172 | ) | (6,547 | ) | |||||||