Annual Report and Accounts 2010

6Tax

Analysis of charge in the year:

 

2010
£000

2009
£000

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
£000

2009
£000

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
£000

2009
£000

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
£000

2009
£000

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
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 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
on outstanding share options

25,626

25,626

Unutilised current year share
option deductions

3,407

3,407

Exchange differences

(310)

(310)

At 31 December 2010
(prior to offsetting)

45,185

13

5,868

19,872

9,605

80,543

Offsetting of deferred
tax liabilities

 

 

 

 

 

(1,956)

At 31 December 2010
(after offsetting)

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
on outstanding share options

9,593

9,593

Unutilised current year share
option deductions

(1,109)

1,109

Exchange differences

(1,877)

(1,877)

At 31 December 2009
(prior to offsetting)

18,945

374

6,914

9,154

12,075

47,462

Offsetting of deferred
tax liabilities

(4,738)

At 31 December 2009
(after offsetting)

42,724

Deferred tax liabilities

Amounts
relating to
intangible
assets arising
on acquisition
£000

Other
£000

Total
£000

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).