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Taxation
 12 Months Ended
Dec. 31, 2018
Income Taxes [Abstract]  
Taxation
Taxation
Tax on profit
 
 
 
 
$ million

 
 
2018

2017

2016

Current tax
 
 
 
 
Charge for the year
 
6,217

4,208

1,762

Adjustment in respect of prior yearsa
 
(221
)
58

(123
)
 
 
5,996

4,266

1,639

Deferred taxb
 
 
 
 
Origination and reversal of temporary differences in the current year
 
907

(503
)
(3,709
)
Adjustment in respect of prior years
 
242

(51
)
(397
)
 
 
1,149

(554
)
(4,106
)
Tax charge (credit) on profit or loss
 
7,145

3,712

(2,467
)
a 
The adjustments in respect of prior years reflect the reassessment of the current tax balances for prior years in light of changes in facts and circumstances during the year.
b 
Origination and reversal of temporary differences in the current year include the impact of tax rate changes on deferred tax balances. 2018 includes a credit of $121 million (2017 $859 million charge) in respect of the reduction in the US federal corporate income tax rate from 35% to 21%, effective from 1 January 2018. The adjustments in respect of prior years reflect the reassessment of deferred tax balances for prior periods in light of all other changes in facts and circumstances during the year.
In 2018, the total tax charge recognized within other comprehensive income was $714 million (2017 $1,499 million charge and 2016 $752 million credit), primarily comprising the deferred tax impact of the remeasurements of the net pension and other post-retirement benefit liability or asset. See Note 32 for further information.
The total tax charge recognized directly in equity was $17 million (2017 $263 million charge and 2016 $5 million credit).
For information on significant estimates and judgements made in relation to taxation see Income taxes in Note 1.
Reconciliation of the effective tax rate
The following table provides a reconciliation of the group weighted average statutory corporate income tax rate to the effective tax rate of the group on profit or loss before taxation.
For 2016, the items presented in the reconciliation are affected as a result of the overall tax credit for the year and the loss before taxation. In order to provide a more meaningful analysis of the effective tax rate, the table also presents separate reconciliations for the group excluding the impacts of the Gulf of Mexico oil spill and impairment losses and reversals, and for the impacts of the Gulf of Mexico oil spill and impairment losses and reversals in isolation.
9. Taxation – continued
 
 
 
 
 
 
$ million

 
 
2018

2017

2016 excluding impacts of Gulf of Mexico oil spill and impairments

2016 impacts of Gulf of Mexico oil spill and impairments

2016

Profit (loss) before taxation
 
16,723

7,180

2,914

(5,209
)
(2,295
)
Tax charge (credit) on profit or loss
 
7,145

3,712

(117
)
(2,350
)
(2,467
)
Effective tax rate
 
43%
52%
(4)%
45%
107%
 
 
 
 
 
 
 
 
 
 
% of profit or loss before taxation
 
Tax rate computed at the weighted average statutory ratea
 
43

44

18

33

52

Increase (decrease) resulting from
 
 
 
 
 
 
Tax reported in equity-accounted entities
 
(5
)
(7
)
(15
)
—

19

Adjustments in respect of prior years
 
—

—

5

13

23

Deferred tax not recognized
 
2

9

26

3

(27
)
Tax incentives for investment
 
(2
)
(6
)
(9
)
—

11

Gulf of Mexico oil spill non-deductible costs
 
—

1

—

(2
)
(4
)
Disposal impactsb
 
—

(1
)
(24
)
—

30

Foreign exchange
 
3

(4
)
1

—

(2
)
Items not deductible for tax purposes
 
1

5

8

—

(11
)
Impact of US tax reformc
 
(1
)
12

—

—

—

Decrease in rate of UK supplementary charged
 
—

—

(15
)
—

19

Other
 
2

(1
)
1

(2
)
(3
)
Effective tax rate
 
43

52

(4
)
45

107

a 
Calculated based on the statutory corporate income tax rate applicable in the countries in which the group operates, weighted by the profits and losses before tax in the respective countries.
b 
In 2016 this related primarily to the tax impact on the contribution of BP’s Norwegian upstream business into Aker BP ASA.
c 
Relates to the deferred tax impact of the reduction in the US federal corporate income tax rate from 35% to 21%, effective from 1 January 2018.
d 
Relates to the deferred tax impact of the reduction in the UK supplementary charge rate applicable to profits arising in the North Sea from 20% to 10% in 2016.
Deferred tax
 
 
 
$ million

Analysis of movements during the year in the net deferred tax liability
 
2018

2017

At 31 December
 
3,513

2,497

Adjustment on adoption of IFRS 9a
 
(36
)
—

At 1 January
 
3,477

2,497

Exchange adjustments
 
(68
)
12

Charge (credit) for the year in the income statement
 
1,149

(554
)
Charge for the year in other comprehensive income
 
734

1,503

Charge for the year in equity
 
17

1

Acquisitions and other additionsb
 
797

54

At 31 December
 
6,106

3,513

a 2018 reflects the deferred tax impact of adjustments recorded by the group on adoption of IFRS 9. See Note 1 for further information.
b 2018 relates primarily to the purchase of an additional 16.5% interest in the Clair field. See Note 3 - Other significant transactions for further information.


9. Taxation – continued
The following table provides an analysis of deferred tax in the income statement and the balance sheet by category of temporary difference:
 
 
 
 
 
 
$ million

 
 
 
Income statementa
 
 
Balance sheeta

 
 
2018

2017

2016

2018

2017

Deferred tax liability
 
 
 
 
 
 
Depreciation
 
(1,297
)
(3,971
)
81

22,565

23,045

Pension plan surpluses
 
65

(12
)
(12
)
1,956

1,319

Derivative financial instruments
 
(36
)
(27
)
(230
)
—

623

Other taxable temporary differences
 
(57
)
(64
)
(122
)
1,224

1,317

 
 
(1,325
)
(4,074
)
(283
)
25,745

26,304

Deferred tax asset
 
 
 
 
 
 
Pension plan and other post-retirement benefit plan deficits
 
(6
)
340

98

(1,319
)
(1,386
)
Decommissioning, environmental and other provisions
 
1,505

3,503

591

(7,126
)
(8,618
)
Derivative financial instruments
 
(25
)
(50
)
(6
)
(144
)
(672
)
Tax creditsb
 
123

1,476

(5,177
)
(3,626
)
(3,750
)
Loss carry forward
 
559

(964
)
249

(5,900
)
(6,493
)
Other deductible temporary differences
 
318

(785
)
422

(1,524
)
(1,872
)
 
 
2,474

3,520

(3,823
)
(19,639
)
(22,791
)
Net deferred tax charge (credit) and net deferred tax liability
 
1,149

(554
)
(4,106
)
6,106

3,513

Of which – deferred tax liabilities
 
 
 
 
9,812

7,982

 – deferred tax assets
 
 
 
 
3,706

4,469

a The 2017 and 2018 income statement and balance sheet are impacted by the reduction in US federal corporate income tax rate from 35% to 21%, effective from 1 January 2018.
b 
The 2016 income statement reflected the impact of a loss carry-back claim in the US, displacing foreign tax credits utilized in prior periods which are now carried forward.

The recognition of deferred tax assets of $2,758 million (2017 $3,503 million), in entities which have suffered a loss in either the current or preceding period, is supported by forecasts which indicate that sufficient future taxable profits will be available to utilize such assets. For 2018, $1,563 million relates to the US (2017 $2,067 million) and $1,108 million relates to India (2017 $1,336 million).
A summary of temporary differences, unused tax credits and unused tax losses for which deferred tax has not been recognized is shown in the table below.
 
 
 
$ billion

At 31 December
 
2018

2017

Unused US state tax lossesa
 
6.6

6.8

Unused tax losses – other jurisdictionsb
 
4.3

4.5

Unused tax credits
 
22.5

20.1

of which – arising in the UKc
 
18.7

16.3

              – arising in the USd
 
3.8

3.8

Deductible temporary differencese
 
37.3

31.4

Taxable temporary differences associated with investments in subsidiaries and equity-accounted entities
 
1.5

1.6

a 
For 2018 these losses expire in the period 2019-2038 with applicable tax rates ranging from 3% to 12%.
b 
The majority of the unused tax losses have no fixed expiry date.
c 
The UK unused tax credits arise predominantly in overseas branches of UK entities based in jurisdictions with higher statutory corporate income tax rates than the UK. No deferred tax asset has been recognized on these tax credits as they are unlikely to have value in the future; UK taxes on these overseas branches are largely mitigated by double tax relief in respect of overseas tax. These tax credits have no fixed expiry date.
d 
For 2018 the US unused tax credits expire in the period 2019-2028.
e 
The majority comprises fixed asset temporary differences in the UK. Substantially all of the temporary differences have no expiry date.
 
 
 
 
$ million

Impact of previously unrecognized deferred tax or write-down of deferred tax assets on tax charge
 
2018

2017

2016

Current tax benefit relating to the utilization of previously unrecognized deferred tax assets
 
83

22

40

Deferred tax benefit arising from the reversal of a previous write-down of deferred tax assets
 
—

—

269

Deferred tax benefit relating to the recognition of previously unrecognized deferred tax assets
 
112

436

394

Deferred tax expense arising from the write-down of a previously recognized deferred tax asset
 
169

78

55