Energy giant BP expects to benefit from US President Donald Trump’s tax reforms, but will take a one off 1.5 billion US dollars (£1.1 billion) hit from the sweeping changes.
The company said on Tuesday that the reduction of the US federal corporate income tax rate from 35% to 21%, which came into force on Monday, will mean its future US earnings will be “positively impacted”.
However, BP added that the reform will require a revaluation of BP’s US deferred tax assets and liabilities, with the estimated impact of this being a “one-off non-cash charge” to the group income statement of around 1.5 billion US dollars (£1.1 billion).
The hit will be shown in BP’s fourth quarter results.
“BP expects its future US after-tax earnings to be positively impacted by the recently-enacted changes to US corporate taxes, largely due to the reduction of the US federal corporate income tax rate from 35% to 21%.
“The ultimate impact of the change in the US corporate income tax rate is subject to a number of complex provisions in the legislation which BP is reviewing,” the company said.
Last week Goldman Sachs warned that it is likely to take a 5 billion US dollar (£3.7 billion) hit to earnings as a result the tax reforms.
The Wall Street bank said that the biggest impact would come as a result of the repatriation tax which covers earnings from foreign subsidiaries, accounting for around two-thirds of the total financial drag.
Both Royal Dutch Shell and Barclays have warned profits will be affected as they have to recalculate the deferred tax assets built up on their balance sheets.
But both firms said they expect to benefit in the long run, with Shell saying the changes are set to be “favourable” for the group and its US business.
President Trump signed the 1.5 trillion US dollar (£1.1 trillion) tax overhaul into law late in 2017, cutting tax rates for businesses and also offering some temporary cuts for some individuals and families.
It includes slashing corporation tax in the US from 35% to 21%.
The US president 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.