Note C: Other profit and loss items
This section provides information relating to the following areas of the consolidated expenditure statement:
Acquisitions and disposals
The BBC operates within a competitive market, and in order to ensure the BBC remains competitive and innovative within the market place, commercial decisions can be made to acquire other commercial operations or dispose of existing assets and investments.
Risk – Acquisitions
Where large acquisitions are performed there is the risk that the transaction is not valued or accounted for correctly given the degree of judgement applied to the fair value calculation of the assets and liabilities purchased, the value of the consideration paid and consequently the resulting goodwill generated.
Judgements – Acquisitions
All identified assets and liabilities included within an acquisition are recognised at fair value as at the acquisition date. Fair value is determined by what could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Judgement is required in determining the valuation method for each identifiable asset and liability, which is specific for each category based on the most appropriate valuation method – including the cost, income and market approaches.
Other gains and losses
The BBC generates gains and losses which are unrelated to its normal course of business. These gains and losses are associated with the reclassification of certain financial assets which are separately disclosed.
Judgement – Other gains and losses
The classification of income or expense as exceptional in nature and hence recognised separately from operating profit requires judgement.
Net financing costs
The BBC incurs interest and other costs associated with the borrowing of funds which largely relate to bank borrowings, leases and the unwinding of discount rate applied to its longer-term payables. Financing income is largely generated by the BBC on the cash it holds in the bank, including its investments returns during the year and the unwinding of discounts applied to its longer-term receivables.
Also included in net financing costs is the fair value movement of financial instruments used to manage the risk of interest rate fluctuations and fix the payment profile of lease repayments. Depending on market movements, these fair value changes could be classified as either income or expense in the year.
Estimate – Net finance costs
Net finance costs is the difference between the expected return on assets and the interest liabilities. For long-term receivables (where the right to receive consideration exceeds one year) and long-term payables (where the obligation to pay consideration exceeds one year) an effective interest rate is used to discount future cash flows over the life of the contract back to its present value. Judgement is required in determining the value of the effective interest rate so it reflects a current market assessment of the time value of money.
Taxation
The BBC’s public sector ‘free-to-air’ broadcasting activities are not subject to taxation. The PSB Group is however liable to taxation on its other activities which yield a taxable profit including rent, royalties and interest receivable. The commercial subsidiaries in the BBC Group are taxed in accordance with tax legislation.
Estimate – Deferred tax
The amount of deferred tax provided is based on the expected manner of realisation of settlement of the carrying amount of assets and liabilities. A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available to utilise the temporary difference. Recognition of deferred tax assets therefore involves estimates around the timing and level of future taxable income.
C1 Acquisitions
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of an acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given by the BBC in exchange for control of the acquiree. The acquiree’s separately identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair value at the acquisition date.
Subsequent adjustments to the fair values of net assets acquired are made within 12 months of the acquisition date where original fair values were determined provisionally. These adjustments are accounted for from the date of acquisition. Transaction costs that the BBC incurs in connection with a business combination, such as legal fees, due diligence fees and other professional and consulting fees, are expensed as incurred.
On acquisition, the BBC recognises any non-controlling interest either at fair value or at the non-controlling interest’s proportionate share of net assets. When control is obtained in successive share purchases (a ‘step acquisition’) it is accounted for using the acquisition method at the acquisition date. The previously held interest is remeasured to fair value at the acquisition date and a gain or loss is recognised in the consolidated expenditure statement.
All identified assets and liabilities included within an acquisition are recognised at fair value as at the acquisition date.
There were no material acquisitions in either the current or prior year.
C2 Disposals
There were no material disposals in the current year.
The BBC disposed of its interest in New Video Channel America, LLC and Moonage during the prior year.
C3 Other gains and losses
The table below provides a summary of the other gains and losses.
| Note | 2026 £m | 2025 £m | |
|---|---|---|---|
(Loss)/gain on financial instruments |
| (10) | 10 |
Gain on disposal of asset held for sale |
| – | 13 |
Gain on disposal of investment property |
| – | 7 |
Loss on deemed disposal of associates and joint ventures |
| (1) | – |
Gain on disposal of interests in associates and joint ventures | – | 1 | |
Gain in earn-out payments due in respect of prior acquisitions |
| 2 | – |
Impairment of investments |
| (6) | (10) |
Other gains and losses |
| – | 2 |
Total |
| (15) | 23 |
Deemed disposal gains and losses were driven by the BBC increasing its investment leading to the reclassification to that of a subsidiary. The entity is therefore consolidated as such, and hence a deemed disposal is recognised for the equity investment previously held.
C4 Net financing costs
Set out below is an analysis of the financing income and expenses incurred in the year.
| Note | 2026 £m | 2025* £m | |
|---|---|---|---|
Financing income |
|
|
|
Interest income |
| 16 | 26 |
Interest on lease receivable |
| 12 | 13 |
Unwinding of discounted receivables |
| 16 | 17 |
Fair value gains on financial instruments classified as fair value through surplus/(deficit) |
| 3 | 6 |
Financing income excluding that received from pension plan liabilities |
| 47 | 62 |
Net interest income on pension plan liabilities | 52 | – | |
Total financing income |
| 99 | 62 |
|
|
|
|
Financing costs |
|
|
|
Interest expense |
| (35) | (29) |
Unwinding of discounted payables |
| (1) | (1) |
Interest on obligations under leases | (54) | (48) | |
Total financing expenditure excluding that paid on pension plan liabilities |
| (90) | (78) |
Net interest expenditure on pension plan liabilities |
| – | (3) |
Total financing expenditure |
| (90) | (81) |
|
|
|
|
Net financing income/(expenditure) |
| 9 | (19) |
*Comparatives have been restated to split out interest on lease receivables.
C5 Taxation
📘 The tax charge for the period comprises both tax currently payable and deferred tax. Taxation is recognised in the consolidated expenditure statement except to the extent that it relates to items recognised directly in reserves, in which case it is recognised in reserves.
Current tax is the expected tax payable for the year, using tax rates that are enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. In respect of tax currently payable:
- the PSB Group is not liable for corporation tax on any surplus licence fee income or grants received from government departments; however, it is fully liable for corporation tax on capital gains and on all its other external income. Expenditure on capital assets is not eligible for capital allowances giving rise to temporary differences that would lead to deferred tax assets or liabilities. Movements of fair value adjustments in the consolidated expenditure statement give rise to deferred tax balances; and
- the BBC’s Commercial Group is liable for corporation tax based on taxable profit for the year.
Current tax assets and current tax liabilities are offset if, and only if, there is a legally enforceable right to set off the recognised amounts; and the entity intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is provided using the balance sheet liability method on any temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the tax rates expected to apply in the period when the liability is settled or the asset is realised using tax rates enacted or substantively enacted at the balance sheet date.
Deferred tax assets and deferred tax liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
- the same taxable entity; or
- different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
C5.1 Recognised in the consolidated expenditure statement
The tax credit for the year, based on the rate of corporation tax of 25% (2025: 25%) comprised:
| Note | 2026 £m | 2025 £m | |
|---|---|---|---|
Current tax |
|
|
|
UK corporation tax |
| (11) | 11 |
Foreign tax |
| (40) | (24) |
Adjustments in respect of prior years |
| – | (7) |
Total current tax |
| (51) | (20) |
Deferred tax |
|
|
|
Origination and reversal of temporary differences |
| 30 | 14 |
Adjustments in respect of prior years |
| 3 | 17 |
Total deferred tax |
| 33 | 31 |
Total taxation in the consolidated expenditure statement | (18) | 11 |
C5.2 Reconciliation of the effective tax rate
The Group's effective tax rate for the year ended 31 March 2026 is 17% (2025: (9)%) which is lower than (2025: lower than) the standard rate of Corporation Tax in the UK due to the items shown below:
| Note | 2026 £m | 2025 £m |
|---|---|---|---|
Deficit before tax |
| (103) | (123) |
Deficit before tax multiplied by standard rate of corporation tax in the UK of 25% (2025: 25%) |
| 26 | 31 |
Effects of: |
|
|
|
Public service activities |
|
|
|
Public service taxable external income |
| 8 | 10 |
Non-taxable public service income |
| (45) | (48) |
Commercial activities |
|
|
|
Disallowed expenditure (including impairment) |
| (5) | 10 |
Creative sector incentives |
| (8) | 21 |
Tax exempt capital gain (International) |
| – | (8) |
Tax differential on overseas earnings |
| (13) | (1) |
Change in unrecognised deferred tax assets |
| 15 | – |
Deferred tax not recognised |
| 1 | (14) |
Adjustments in respect of prior years |
| 3 | 10 |
Total tax expense/(income) for the year | (18) | 11 |
The tax charge is primarily driven by the results of the commercial businesses, as the Group’s public sector ‘free-to-air’ broadcasting activities are not subject to taxation.
C5.3 Factors that may affect future tax charges
The UK corporation tax rate of 25% was effective from 1 April 2023 (and substantively enacted on 24 May 2021).
In the UK, Finance Act (No.2) 2023 (substantively enacted on 20 June 2023) introduced a 15% global minimum corporate income tax rate in line with the Organisation for Economic Cooperation and Development's (OECD) Pillar Two model framework. Pillar Two legislation has also been enacted or substantively enacted in certain jurisdictions in which the Group operates. The legislation is effective for the Group's financial year beginning on 1 April 2024.
Management has performed an assessment of the Group's potential exposure to Pillar Two income taxes based on financial information of the constituent entities in the Group. Based on the assessment performed, the Pillar Two effective tax rates in all jurisdictions in which the Group operates are either above 15% or covered by exemptions provided within the rules (Transitional Safe Harbour).
Therefore, it is not expected that the legislation will have a material impact on the Group tax charge. As a result, the BBC is not subject to additional top-up taxes under the Pillar Two framework and no deferred tax liabilities have been recognised in relation to Pillar Two.
The Group will continue to monitor developments in the implementation of Pillar Two rules and assess any future impact on its financial reporting.
C5.4 Current tax asset
The current tax asset totalling £80 million (2025: £79 million) includes £68 million (2025: £50 million) due in respect of creative sector incentives outstanding on high-end drama, comedy, natural history and factual productions.
C5.5 Deferred tax assets/(liabilities)
| Fixed asset temporary differences £m | Provisions £m | Financial instruments £m | Carried forward losses £m | Intangible assets and other temporary differences £m | Net deferred tax liability £m | |
|---|---|---|---|---|---|---|
At 1 April 2025 | 6 | – | (6) | – | (50) | (50) |
(Charge)/credit to the consolidated expenditure statement | (1) | 5 | – | 15 | 11 | 30 |
Charge to reserves | – | – | 3 | – | – | 3 |
Adjustment in respect of prior years | (1) | 1 | – | – | 3 | 3 |
At 31 March 2026 | 4 | 6 | (3) | 15 | (36) | (14) |
| Deferred tax liability presented within: | 2026 £m | 2025 £m |
|---|---|---|
Non-current assets | 1 | – |
Non-current liabilities | (15) | (50) |
Total | (14) | (50) |
Deferred tax is the amount of income tax payable or recoverable in future periods in respect of taxable or deductible temporary differences, the carry forward of unused losses and/or the carry forward of unused tax credits.
Temporary differences are differences between the carrying amount of an asset or liability in the consolidated balance sheet and its tax base, where the tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.
The BBC has unrecognised deferred tax assets arising on capital losses totalling £162 million (2025: £152 million) and other trading and non-trading losses, including non-trading losses arising from fixed intangible assets, of £936 million (2025: £980 million).
The deferred tax asset on capital losses has not been recognised on the basis that there is insufficient certainty that capital gains will arise against which the Group can utilise these losses. The deferred tax assets on trading and non-trading losses have not been recognised on the basis that there is insufficient certainty that future profits will arise against which the Group can utilise these losses.
There is no time limit for the utilisation of either of these losses and the position is reviewed annually.
C5.6 Current tax liabilities
Current tax liabilities totalling £3 million (2025: £9 million) were due in overseas jurisdictions.
