Notes to the financial statements
13. Deferred tax
Deferred tax is calculated in full on temporary differences under the balance sheet liability method using the appropriate tax rate for the jurisdiction in which the temporary difference arises. The movement in the deferred tax balance during the year can be analysed as follows:
| Group | Company | ||||
|---|---|---|---|---|---|
| 2008 £m |
2007 £m |
2008 £m |
2007 £m |
||
| At 1 January | 27.8 | 15.7 | (0.1) | – | |
| Exchange differences | 4.0 | 3.2 | – | – | |
| Credit / (charge) to the income statement | 2.3 | 8.8 | 0.4 | (0.2) | |
| Tax credit on items taken directly to equity | 3.4 | 0.1 | 0.1 | 0.1 | |
| At 31 December | 37.5 | 27.8 | 0.4 | (0.1) | |
An analysis of the deferred tax balance is set out below:
| Group | Company | |||||||
|---|---|---|---|---|---|---|---|---|
| Losses £m |
Retirement benefit obligations £m |
Other temporary differences £m |
Total £m |
Retirement benefit obligations £m |
Other temporary differences £m |
Total £m |
||
| At 1 January 2008 | 1.3 | (0.4) | 26.9 | 27.8 | (0.1) | – | (0.1) | |
| Exchange differences | 0.3 | – | 3.7 | 4.0 | – | – | – | |
| Credit to the income statement | 1.2 | – | 1.1 | 2.3 | – | 0.4 | 0.4 | |
| Tax credit on items taken directly to equity | – | 0.9 | 2.5 | 3.4 | 0.2 | (0.1) | 0.1 | |
| At 31 December 2008 | 2.8 | 0.5 | 34.2 | 37.5 | 0.1 | 0.3 | 0.4 | |
Deferred tax assets have been recognised in respect of all tax losses and other temporary timing differences giving rise to deferred tax assets because it is probable that these assets will be recovered.
Deferred tax has not been provided on approximately £196.9m of unremitted earnings of the Group’s overseas subsidiaries. The Group’s policy is to retain profits in such overseas subsidiaries in circumstances where a distribution would generate a tax cost in the UK. Profits will only be repatriated where it is assessed that any liability that would otherwise arise will be substantially covered by foreign tax credits. During 2008 £52.0m of profits arising overseas were repatriated, without giving rise to any UK tax.