Annual report and accounts 2008

7Tax

Analysis of charge in the year:

Analysis of charge in the year
	2008 £000	2007 £000
Current tax	24,751	14,489
Deferred tax	(5,154)	(4,643)
Taxation	19,597	9,846

Analysis of tax on items charged to equity:

Analysis of tax on items charged to equity
	2008 £000	2007 £000
Deferred tax credit on available-for-sale investments	84	146
Deferred tax charge on outstanding share options	1,838	2,085
Current tax benefit on share options	(808)	(4,297)

The tax for the year is different to the standard rate of corporation tax in the UK, as explained below:

The tax for the year is different to the standard rate of corporation tax
	2008 £000	2007 £000
Profit before tax	63,189	45,096
Profit before tax multiplied by rate of corporation tax in the UK of 28.5% (2007: 30%)	18,009	13,529
Effects of:
Adjustments to tax in respect of prior years	(707)	(838)
Adjustments in respect of foreign tax rates	1,174	(895)
Research and development tax credits	(5,424)	(5,170)
Permanent differences – foreign exchange	279	(84)
Permanent differences – other*	1,979	(2,726)
Movements in deferred tax assets relating to losses	(1,786)	4,824
Foreign withholding tax	2,551	912
Amortisation of other intangible assets	(1,524)	(1,359)
Timing differences in respect of share-based payments	3,170	599
Other differences	1,876	1,054
Total taxation	19,597	9,846

*Includes expenditure disallowable for tax purposes and benefits resulting from restructuring following the acquisition of Artisan.

Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate relevant to each tax jurisdiction.

The movement on the deferred tax account is shown below:

The movement on the deferred tax account
	2008 £000	2007 £000
At 1 January	17,598	14,916
Profit and loss credit	5,154	4,643
Adjustment in respect of share-based payments	(1,838)	(1,837)
Exchange differences	3,404	22
Amount acquired with subsidiary undertakings	(1,394)	–
Available-for-sale investments	(84)	(146)
At 31 December	22,840	17,598

Deferred tax assets have been partially recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets because it is not probable that the unrecognised portion of these assets will be recovered. The amount of deferred tax assets unrecognised at 31 December 2008 is £8,617,000 (2007: £9,574,000).

No deferred tax has been recognised in respect of a further £16.2 million (2007: £31.7 million) of unremitted earnings of overseas subsidiaries because the Group is in a position to control the timing of the reversal of the differences and either it is possible that such differences will not reverse in the foreseeable future or no tax is payable on the reversal.

The movements in deferred tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction as permitted by IAS 12, “Income Taxes”) during the year are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

Deferred tax assets

Deferred tax assets
	Amounts relating to share-based payments £000	Temporary difference on available- for-sale investments £000	Temporary differences relating to fixed assets £000	Tax losses and R&D tax credits carried forward £000	Non- deductible reserves £000	Total £000
At 1 January 2008	14,664	678	4,606	2,669	8,553	31,170
Reclassification	(6,479)	−	−	6,479	−	−
Profit and loss (charge)/credit	(1,197)	−	2,700	(1,297)	1,051	1,257
Available-for-sale investments	−	(84)	−	−	−	(84)
Movement on deferred tax arising on outstanding share options	(1,838)	−	−	−	−	(1,838)
Exchange differences	−	−	−	6,223	–	6,223
At 31 December 2008 (prior to offsetting)	5,150	594	7,306	14,074	9,604	36,728
Offsetting of deferred tax liabilities						(12,665)
At 31 December 2008 (after offsetting)						24,063
At 1 January 2007	13,315	231	5,244	13,626	3,878	36,294
Profit and loss (charge)/credit	3,186	593	(638)	(10,752)	4,675	(2,936)
Available-for-sale investments	–	(146)	–	–	–	(146)
Movement on deferred tax arising on outstanding share options	(1,837)	–	–	–	–	(1,837)
Exchange differences	–	–	–	(205)	–	(205)
At 31 December 2007 (prior to offsetting)	14,664	678	4,606	2,669	8,553	31,170
Offsetting of deferred tax liabilities						(11,937)
At 31 December 2007 (after offsetting)						19,233

Deferred tax liabilities

Deferred tax liabilities
	Amounts relating to intangible assets arising on acquisition £000	Other £000	Total £000
At 1 January 2008	13,572	−	13,572
Acquired with subsidiary (Logipard)	1,394	−	1,394
Movement in respect of amortisation of intangible assets	(7,341)	−	(7,341)
Other short-term differences	−	3,444	3,444
Exchange differences	2,819	−	2,819
At 31 December 2008 (prior to offsetting)	10,444	3,444	13,888
Offsetting of deferred tax assets			(12,665)
At 31 December 2008 (after offsetting)			1,223
At 1 January 2007	21,378	–	21,378
Movement in respect of amortisation of intangible assets	(7,579)	–	(7,579)
Exchange differences	(227)	–	(227)
At 31 December 2007 (prior to offsetting)	13,572	–	13,572
Offsetting of deferred tax assets			(11,937)
At 31 December 2007 (after offsetting)			1,635

The deferred tax liability due after more than one year prior to offsetting is £5,025,000 (2007: £7,213,000).

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