Annual report and accounts 2008

Notes contentsNotes to consolidated financial statements

7. Income tax

All figures in £ millions	Notes	2008	2007
Current tax
Charge in respect of current year		(89)	(71)
Other adjustments in respect of prior years		10	27
Total current tax charge		(79)	(44)
Deferred tax
In respect of timing differences		(97)	(96)
Other adjustments in respect of prior years		4	9
Total deferred tax charge	13	(93)	(87)
Total tax charge		(172)	(131)

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the UK tax rate as follows:

All figures in £ millions	2008	2007
Profit before tax	585	468
Tax calculated at UK rate (2008: 28.5%, 2007: 30%)	(167)	(141)
Effect of overseas tax rates	(29)	(25)
Joint venture and associate income reported net of tax	7	7
Net expense not deductible for tax purposes	(1)	(9)
Utilisation of previously unrecognised tax losses	4	3
Unutilised tax losses	—	(2)
Prior year adjustments	14	36
Total tax charge	(172)	(131)
UK	(53)	(42)
Overseas	(119)	(89)
Total tax charge	(172)	(131)
Tax rate reflected in earnings	29.4%	28.0%

The tax rate reflected in adjusted earnings is calculated as follows:

All figures in £ millions	2008	2007
Profit before tax	585	468
Add back: amortisation of acquired intangibles	86	45
Add back: other net finance costs	3	21
Adjusted profit before tax — continuing operations	674	534
Adjusted profit before tax — discontinued operations	—	15
Total adjusted profit before tax	674	549
Total tax charge	(172)	(131)
Add back: tax benefit on other net gains and losses	(7)	(9)
Add back: tax benefit on amortisation of acquired intangibles	(31)	(19)
Add back: tax benefit on other finance income	(1)	(6)
Tax amortisation benefit on goodwill and intangibles	33	25
Adjusted income tax charge — continuing operations	(178)	(140)
Adjusted income tax charge — discontinued operations	—	(5)
Total adjusted income tax charge	(178)	(145)
Tax rate reflected in adjusted earnings	26.4%	26.4%

The tax benefit on items charged to equity is as follows:

All figures in £ millions	2008	2007
Share-based payments	(7)	7
Pension contributions and actuarial gains and losses	10	28
Net investment hedges and other foreign exchange gains and losses	(1)	(6)
	2	29