- Financial Statements
Notes to the Consolidated Financial Statements
for the year to 31 December 2007
15. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year.
| Capital allowances | Short-termtiming differences | Brands | Inventory adjustments | Retirement benefit obligations | Total | |
| £m | £m | £m | £m | £m | £m | |
| At 1 January 2006 | 1.5 | 32.3 | – | – | 66.5 | 100.3 |
| Credit / (charge) to income | 1.6 | (16.6) | – | 8.9 | 1.6 | (4.5) |
| Credit / (charge) to equity | – | (1.4) | – | – | 0.5 | (0.9) |
| Changes in exchange rates | – | (0.3) | – | – | – | (0.3) |
| At 31 December 2006 | 3.1 | 14.0 | – | 8.9 | 68.6 | 94.6 |
| Acquired on acquisition of a subsidiary | 0.7 | 12.8 | (41.2) | 85.6 | 34.5 | 92.4 |
| Credit / (charge) to income | 0.4 | (15.0) | 11.4 | (54.9) | (10.1) | (68.2) |
| Credit / (charge) to equity | – | (2.6) | – | – | (29.6) | (32.2) |
| Changes in exchange rates | – | 0.8 | – | 0.5 | – | 1.3 |
| At 31 December 2007 | 4.2 | 10.0 | (29.8) | 40.1 | 63.4 | 87.9 |
The recognition of deferred tax assets on short-term timing differences and inventory write-downs takes into account the reduced expected usage in the US in future years, which has been assessed in light of the weakening market conditions in the second half of 2007.
In addition the total asset has reduced by £3.9m due to the re-evaluation of share schemes yet to vest at the end of 2007. £2.6m of this has been recorded as a reduction in the share-based payment tax reserve, (see note 30).
Deferred tax on the UK timing differences has been calculated at the rate of 28 per cent (2006: 30 per cent). The effect of the reduction in the UK corporation tax rate from 30 per cent to 28 per cent from 1 April 2008 has resulted in a reduced net deferred tax asset at the end of 2007 of an amount of £2.5m. Of this £2.5m, £2.3m has been charged directly to the statement of recognised income and expense.
The net deferred tax balance is analysed into assets and liabilities as follows:
| 2007 | 2006 | |
| £m | £m | |
| Deferred tax assets | 117.7 | 95.4 |
| Deferred tax liabilities | (29.8) | (0.8) |
| 87.9 | 94.6 |
At the balance sheet date the Group has unused UK capital losses of £418.0m (2006: £187.2m), of which £296.8m (2006: £62.5m) are agreed available for offset against future capital profits. No deferred tax asset has been recognised in respect of these losses because the directors do not consider that these capital losses will be utilised in the foreseeable future. In addition some of the capital losses would be further restricted as to offset dependent on the source within the enlarged Group of any gains and previous losses.
The Group has not recognised potential deferred tax assets of £189.4m (2006: £nil) (primarily relating to inventory adjustments) in respect of the US and a further £9.7m (2006: £3.9m) (relating to tax losses) in other jurisdictions. These are not recognised principally due to the uncertainty of future profits against which to offset such potential deductions and losses.
Temporary differences arising in connection with interests in associates and joint ventures are insignificant.