Notes 6-10

7. Taxation

The tax charge is based on the profit for the year and comprises:


 
2008
£m
2007
£m
2006
£m
Corporation tax
Current year 217.7 240.4 253.5
Prior years 7.0 (52.2) (52.5)
  224.7 188.2 201.0
Deferred tax
Current year (8.4) 10.2 (17.6)
Net credit in relation to the amortisation of acquired
intangible assets and other goodwill items
(12.4) (2.8) (9.1)
  (20.8) 7.4 (26.7)
Prior years 29.0 8.7 25.1
  8.2 16.1 (1.6)
Tax charge 232.9 204.3 199.4

The tax charge for the year can be reconciled to profit before taxation in the income statement as follows:


2008
£m
2007
£m
2006
£m
Profit before taxation 746.8 719.4 682.0
Tax at the blended UK corporation tax rate of 28.5%
(2007, 2006: UK 30%)
212.8 215.8 204.6
Tax effect of share of results of associates (13.4) (12.4) (12.3)
Tax effect of expenses that are not (taxable)/deductible (11.7) 34.7 25.4
Tax effect of utilisation or recognition of
tax losses not previously recognised
(6.5) (29.6) (24.4)
Effect of different tax rates of subsidiaries
operating in other jurisdictions
3.5 26.7 19.9
Unused tax losses carried forward 12.2 12.5 13.7
Prior period adjustments 36.0 (43.4) (27.5)
Tax charge 232.9 204.3 199.4
Effective tax rate on profit before tax 31.2% 28.4% 29.2%
Effective tax rate on headline PBT1,2 25.3% 25.3% 27.2%

Notes

1
Headline PBT and the effective tax rate on headline PBT are defined in note 31.
2
Excluding the net deferred tax credit in relation to the amortisation of acquired intangible assets and other goodwill items.

The Group is subject to corporate taxes in a number of different jurisdictions and judgement is required in determining the appropriate provision for transactions where the ultimate tax determination is uncertain. In such circumstances the Group recognises liabilities for anticipated taxes based on the best information available and where the anticipated liability is both probable and estimable. Where the final outcome of such matters differs from the amount recorded, any differences may impact the income tax and deferred tax provisions in the period in which the final determination is made.

The tax laws that apply to the Group’s subsidiaries may be amended by the relevant tax authorities. Such potential amendments are regularly monitored and adjustments are made to the Group’s tax liabilities and deferred tax assets and liabilities where necessary.

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