6Tax
Analysis of charge in the year:
| 2010 | 2009 |
Current tax: |
| |
Current tax on profits for the year | 31,391 | 20,456 |
Adjustments in respect of prior years | 298 | (2,664) |
Total current tax | 31,689 | 17,792 |
Deferred tax | (7,636) | (10,972) |
Income tax expense | 24,053 | 6,820 |
Analysis of tax on items charged to equity:
| 2010 | 2009 |
Deferred tax credit on outstanding share options and awards | (29,033) | (9,593) |
Current tax benefit on share options and awards | (7,601) | (785) |
The tax for the year is different to the standard rate of corporation tax in the UK, as explained below:
| 2010 | 2009 |
Profit before tax | 110,027 | 47,259 |
Profit before tax multiplied by rate of corporation tax in the UK of 28% (2009: 28%) | 30,808 | 13,233 |
Effects of: |
| |
Adjustments to tax in respect of prior years | 298 | (2,664) |
Adjustments in respect of foreign tax rates | 1,203 | 295 |
Research and development tax credits | (7,265) | (5,650) |
Permanent differences – foreign exchange | − | 4,462 |
Permanent differences – other* | 1,340 | 402 |
Permanent differences – recognition of US deferred tax assets | (4,005) | − |
Foreign withholding tax | 2,013 | 1,648 |
Amortisation of other intangible assets | (641) | (1,294) |
Timing differences in respect of share-based payments | 302 | (3,612) |
Total taxation | 24,053 | 6,820 |
* Includes expenditure disallowable for tax purposes.
Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using the tax rate relevant to each tax jurisdiction.
The movement on the deferred tax account is shown below:
| 2010 | 2009 |
At 1 January | 42,004 | 22,840 |
Income statement credit | 7,636 | 10,972 |
Adjustment in respect of share-based payments | 29,033 | 9,593 |
Exchange differences | (387) | (1,408) |
Amount acquired with subsidiary undertakings | – | 7 |
At 31 December | 78,286 | 42,004 |
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. Previously unrecognised deferred tax assets of £4,005,000 in the US have been recognised due to the increased likelihood that these will be recoverable.
The amount of deferred tax assets unrecognised at 31 December 2010 is £1,425,000 (2009: £7,678,000).
No deferred tax has been recognised in respect of a further £23.0 million (2009: £29.0 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.
In June 2010, the UK government announced its intention to reduce the main rate of UK corporation tax from 28% to 24% by 1 April 2014 by enacting, every year until 2014, a reduction of 1%. At 31 December 2010, the first of these reductions, being a change in UK corporation tax rate from 28% to 27% on 1 April 2011, had been substantively enacted. The government also announced that the main rate of capital allowances will decrease from 20% to 18% from 1 April 2012. These changes have not had a material impact on the deferred tax balances as at 31 December 2010.
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 2010 | 18,945 | 374 | 6,914 | 9,154 | 12,075 | 47,462 |
Income statement credit/(charge) | 614 | (361) | (1,046) | 7,621 | (2,470) | 4,358 |
Movement on deferred tax arising | 25,626 | – | – | – | – | 25,626 |
Unutilised current year share | – | – | – | 3,407 | – | 3,407 |
Exchange differences | – | – | – | (310) | – | (310) |
At 31 December 2010 | 45,185 | 13 | 5,868 | 19,872 | 9,605 | 80,543 |
Offsetting of deferred |
|
|
|
|
| (1,956) |
At 31 December 2010 | 78,587 | |||||
At 1 January 2009 | 5,150 | 594 | 7,306 | 14,074 | 9,604 | 36,728 |
Income statement credit/(charge) | 5,311 | (220) | (392) | (4,152) | 2,471 | 3,018 |
Movement on deferred tax arising | 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 |
Deferred tax liabilities
Amounts | Other | Total | |
At 1 January 2010 | 4,763 | 695 | 5,458 |
Movement in respect of amortisation of intangible assets | (3,361) | – | (3,361) |
Other short-term differences | – | 83 | 83 |
Exchange differences | 77 | – | 77 |
At 31 December 2010 (prior to offsetting) | 1,479 | 778 | 2,257 |
Offsetting of deferred tax assets |
|
| (1,956) |
At 31 December 2010 (after offsetting) | 301 | ||
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 |
The deferred tax liability due after more than one year prior to offsetting is £1,308,000 (2009: £1,198,000).