Preliminary results year ended 31 December 2008
05 March 2009
Appendix D – IFRS additional disclosures
D8 – Tax
(a) Tax (credit)/charged to the income statement
(i) The total tax (credit)/charge comprises:
| 2008 £m |
Restated 2007 £m |
|
|---|---|---|
| Current tax | ||
| For this year | 527 | 885 |
| Prior year adjustments | (284) | (94) |
| Total current tax | 243 | 791 |
| Deferred tax | ||
| Origination and reversal of temporary differences | (1,814) | (348) |
| Changes in tax rates or tax laws | (7) | (88) |
| Write-down of deferred tax assets | 95 | (6) |
| Total deferred tax | (1,726) | (442) |
| Total tax (credited)/charged to income statement | (1,483) | 349 |
In February 2009 an Australian tax court case was settled in our favour, resulting in the release of tax provisions of £63 million which has reduced the tax charge in the income statement.
(ii) The Group, as a proxy for policyholders in the UK, Ireland, Singapore and Australia, is required to record taxes on investment income and gains each year. Accordingly, the tax benefit or expense attributable to UK, Irish, Singapore and Australian life insurance policyholder returns is included in the tax charge. The tax credit attributable to policyholders’ returns included in the credit above is £1,068 million (2007: £15 million charge).
(iii) The tax (credit)/charge can be analysed as follows:
| 2008 £m |
Restated 2007 £m |
|
|---|---|---|
| UK tax | (1,482) | 94 |
| Overseas tax | (1) | 255 |
| (1,483) | 349 |
(iv) Unrecognised tax losses and temporary differences of previous years were used to reduce current tax expense and deferred tax expense by £139 million and £19 million, respectively (2007: £51 million and £6 million, respectively).
(v) Deferred tax credited to the income statement represents movements on the following items:
| 2008 £m |
2007 £m |
|
|---|---|---|
| Long-term business technical provisions and other insurance items | 591 | 315 |
| Deferred acquisition costs | 224 | 34 |
| Unrealised losses on investments | (1,706) | (793) |
| Pensions and other post-retirement obligations | 16 | 40 |
| Unused losses and tax credits | (413) | (272) |
| Subsidiaries, associates and joint ventures | (199) | (33) |
| Intangibles and additional value of in-force long-term business | 30 | (75) |
| Provisions and other temporary differences | (269) | 342 |
| Total deferred tax credited to income statement | (1,726) | (442) |
(b) Tax (credited)/charged to equity
(i) The total tax (credit)/charge comprises:
| 2008 £m |
2007 £m |
|
|---|---|---|
| Current tax | (16) | (19) |
| Deferred tax | ||
| In respect of pensions and other post-retirement obligations | (15) | 269 |
| In respect of unrealised losses on investments | (204) | (71) |
| (219) | 198 | |
| Total tax (credited)/charged to equity | (235) | 179 |
(ii) The tax credit attributable to policyholders’ returns (2007: £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:
| 2008 £m |
Restated 2007 £m |
|
|---|---|---|
| (Loss)/profit before tax | (2,368) | 1,847 |
| Tax calculated at standard UK corporation tax rate of 28.5% (2007: 30%) | (675) | 554 |
| Different basis of tax – policyholders | (767) | 5 |
| Adjustment to tax charge in respect of prior years | (283) | (49) |
| Non-assessable income | (94) | (124) |
| Non-taxable profit on sale of subsidiaries and associates | (2) | (18) |
| Disallowable expenses | 95 | 7 |
| Different local basis of tax on overseas profits | (61) | 56 |
| Reduction in future UK tax rate (net of movements in unallocated divisible surplus) | – | (64) |
| Deferred tax not recognised | 292 | 1 |
| Other | 12 | (19) |
| Total tax (credited)/charged to income statement | (1,483) | 349 |
