Note 6
6 Tax
Analysis of charge in the year:
| 2009 | 2008 |
Current tax | 17,792 | 24,751 |
Deferred tax | (10,972) | (5,154) |
Taxation | 6,820 | 19,597 |
Analysis of tax on items charged to equity:
| 2009 | 2008 |
Deferred tax charge on available-for-sale investments | − | 84 |
Deferred tax (credit)/charge on outstanding share options | (9,593) | 1,838 |
Current tax benefit on share options | (785) | (808) |
The tax for the year is different to the standard rate of corporation tax in the UK, as explained below:
| 2009 | 2008 |
Profit before tax | 47,259 | 63,189 |
Profit before tax multiplied by rate of corporation tax in the UK of 28% (2008: 28.5%) | 13,233 | 18,009 |
Effects of: |
|
|
Adjustments to tax in respect of prior years | (2,664) | (707) |
Adjustments in respect of foreign tax rates | 295 | 1,174 |
Research and development tax credits | (5,650) | (5,424) |
Permanent differences – foreign exchange | 4,462 | 279 |
Permanent differences – other* | 402 | 1,979 |
Movements in deferred tax assets relating to losses | − | (1,786) |
Foreign withholding tax | 1,648 | 2,551 |
Amortisation of other intangible assets | (1,294) | (1,524) |
Timing differences in respect of share-based payments | (3,612) | 3,170 |
Other differences | − | 1,876 |
Total taxation | 6,820 | 19,597 |
* | 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:
| 2009 | 2008 |
At 1 January | 22,840 | 17,598 |
Profit and loss credit | 10,972 | 5,154 |
Adjustment in respect of share-based payments | 9,593 | (1,838) |
Exchange differences | (1,408) | 3,404 |
Amount acquired with subsidiary undertakings | 7 | (1,394) |
Available-for-sale investments | – | (84) |
At 31 December | 42,004 | 22,840 |
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 2009 is £7,678,000 (2008: £8,617,000).
No deferred tax has been recognised in respect of a further £29.0 million (2008: £16.2 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 probable 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
| Amounts | Temporary | Temporary | Tax losses | Non- | Total |
At 1 January 2009 | 5,150 | 594 | 7,306 | 14,074 | 9,604 | 36,728 |
Profit and loss (charge)/credit | 5,311 | (220) | (392) | (4,152) | 2,471 | 3,018 |
Movement on deferred tax arising on outstanding share options | 9,593 | − | − | − | − | 9,593 |
Unutilised current year share | (1,109) | – | – | 1,109 | – | – |
Exchange differences | − | − | − | (1,877) | − | (1,877) |
At 31 December 2009 | 18,945 | 374 | 6,914 | 9,154 | 12,075 | 47,462 |
Offsetting of deferred |
|
|
|
|
| (4,738) |
At 31 December 2009 |
|
|
|
|
| 42,724 |
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 | (1,838) | − | − | − | − | (1,838) |
Exchange differences | − | − | − | 6,223 | – | 6,223 |
At 31 December 2008 | 5,150 | 594 | 7,306 | 14,074 | 9,604 | 36,728 |
Offsetting of deferred |
|
|
|
|
| (12,665) |
At 31 December 2008 |
|
|
|
|
| 24,063 |
Deferred tax liabilities
| Amounts | Other | Total |
At 1 January 2009 | 10,444 | 3,444 | 13,888 |
Acquired with subsidiary (Logipard) | (7) | – | (7) |
Movement in respect of amortisation of intangible assets | (5,205) | − | (5,205) |
Other short-term differences | − | (2,749) | (2,749) |
Exchange differences | (469) | − | (469) |
At 31 December 2009 (prior to offsetting) | 4,763 | 695 | 5,458 |
Offsetting of deferred tax assets |
|
| (4,738) |
At 31 December 2009 (after offsetting) |
|
| 720 |
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 |
The deferred tax liability due after more than one year prior to offsetting is £1,198,000 (2008: £5,025,000).