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Barclays and Shell warn of huge hit to profits from Trump’s tax reform

Two of Britain’s biggest companies have warned that tax reforms in the US will result in a multi-billion pound hit to their earnings.

Barclays and Shell used the first day of trading since the festive break to signal the likely impact of the Tax Cuts and Jobs Act, which was signed into law in the US on Dec 22, as UK markets were shutting for the Christmas break.

The measure, enacted by President Donald Trump, will result in corporate tax rates falling from 35pc to 21pc, a move that the two FTSE 100 companies said they expected to be favourable in the long-term.

However, the reforms are likely to have a major short-term impact by putting a massive dent in profits, as companies have to recalculate the deferred tax assets they have built up on their balance sheets.

Shell echoed Barclays, saying it expected the changes to be positive in the longer run, but that they would reduce performance in the near term.

The energy giant warned that on the basis of its third-quarter results, it would take a non-cash charge on earnings of between $2bn (£1.5bn) and $2.5bn when it reports its fourth-quarter earnings in February.

Posting its third-quarter results in November, Shell said it had $3.7bn in earnings on a current cost of supply basis including identified items.

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