Logo banner and utilities links

Financial Statements

10. Taxation

Taxation on items charged/(credited) to the income statement

	2007 £m	2006* £m	2005* £m
United Kingdom
Corporation tax at 30%	66	269	22
Adjustment in respect of prior years (i)	(28)	(8)	(19)
Deferred tax (ii)	177	-	80
	215	261	83
Overseas
Corporate tax	109	122	33
Adjustment in respect of prior years	(149)	23	(22)
Deferred tax (ii)	266	129	212
	226	274	223
Taxation	441	535	306
Comprising:
Taxation excluding exceptional items and remeasurements	611	565	424
Taxation exceptional items and remeasurements (note 5)	(170)	(30)	(118)
	441	535	306

*Comparatives have been adjusted to reclassify amounts relating to discontinued operations

(i) The UK corporation tax adjustment in respect of prior years includes £51m (2006: £nil; 2005: £10m) that relates to exceptional items and remeasurements.

(ii) Included within the deferred tax charge is an amount relating to prior years of £73m (2006: £35m tax credit; 2005: £11m tax credit) before exceptional items and remeasurements and £68m (2006: £35m tax credit; 2005: £14m tax credit) after exceptional items and remeasurements respectively.

Taxation on items charged/(credited) to equity

	2007 £m	2006 £m	2005 £m
Corporation tax credit on employee share schemes	(2)	-	-
Deferred tax charge on available-for-sale investments	1	1	-
Deferred tax charge/(credit) on revaluation of cash flow hedges	10	(20)	-
Deferred tax credit on employee share schemes	(11)	(7)	(4)
Deferred tax charge on actuarial gains	70	62	66
	68	36	62
Total tax charge recognised in consolidated statement of recognised income and expense	81	43	66
Total tax credit recognised directly in equity (note 32)	(13)	(7)	(4)
	68	36	62

The tax charge for the year after exceptional items and remeasurements is lower (2006: higher; 2005: lower) than the standard rate of corporation tax in the UK (30%). The differences are explained below:

	Before exceptional items and remeasurements 2007 £m	After exceptional items and remeasurements 2007 £m
Profit before taxation
Before exceptional items and remeasurements	1,909	1,909
Exceptional items and remeasurements	–	(158)
Profit before taxation from continuing operations	1,909	1,751
Profit on continuing operations multiplied by rate of corporation tax in the UK of 30% (2006: 30%; 2005: 30%)	573	525
Effects of:
Adjustments in respect of previous years	(53)	(109)
Expenses not deductible for tax purposes	44	111
Non-taxable income	(61)	(154)
Adjustment in respect of foreign tax rates	64	70
Impact of employee share schemes	9	9
Other	35	(11)
Total taxation from continuing operations	611	441

	%	%
At the effective income tax rate	32.0	25.2

See results for 2007 | 2006 | 2005

Factors that may affect future tax charges

The UK rate of corporation tax is expected to decrease from the current rate of 30% to 28% in 2008/2009. We are in the process of evaluating the impact this tax rate will have on our future tax charge.

There are £nil (2006: £nil; 2005: £39m) non-trade deficits recognised and carried forward in the year.

< Back to top