13. Tax
(a) Tax charged to the income statement
| 2007 £m |
2006 £m |
|
|---|---|---|
| Current tax: | ||
| For the year | 888 | 1,022 |
| Prior year adjustments | (94) | (287) |
| Total current tax | 794 | 735 |
| Deferred tax: | ||
| Origination and reversal of temporary differences | (348) | 221 |
| Changes in tax rates or tax laws | (88) | (7) |
| Write down of deferred tax assets | (6) | (15) |
| Total deferred tax | (442) | 199 |
| Total tax charged to income statement | 352 | 934 |
| Analysed between: | ||
| Tax charge attributable to policyholders’ returns | 15 | 346 |
| Tax charge on IFRS operating profit before tax attributable to shareholders’ profits from continuing operations | 607 | 645 |
| Tax credit on profit on other activities | (270) | (57) |
| 352 | 934 |
The Group, as a proxy for policyholders in the UK, Ireland and Australia, is required to record taxes on investment income and gains each year. Accordingly, the tax benefit or expense attributable to UK, Irish and Australian life insurance policyholder returns is included in the tax charge.
(b) Tax charged to equity
(i) The total tax charge/(credit) comprises:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Current tax credit | (19) | (9) |
| Deferred tax charge | 198 | 14 |
| Total tax charged to equity | 179 | 5 |
(ii) The tax expense attributable to policyholders’ returns included in the charge above is £nil million (2006: nil).
(c) Tax reconciliation
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Profit before tax | 1,857 | 3,323 |
| Tax calculated at standard UK corporation tax rate of 30% (2006: 30%) | 557 | 997 |
| Different basis of tax for UK life insurance | 5 | 209 |
| Adjustment to tax charge in respect of prior years | (49) | (287) |
| Non-assessable dividends | (124) | (55) |
| Non-taxable profit on sale of subsidiaries and associates | (18) | (80) |
| Disallowable expenses | 7 | 46 |
| Different local basis of tax on overseas profits | 56 | 201 |
| Reduction in future UK tax rate (net of movement in unallocated divisible surplus) | (64) | - |
| Deferred tax valuation difference | 1 | (60) |
| Other | (19) | (37) |
| Tax charged to the income statement | 352 | 934 |
