Section image

Cherries
oil on canvas
22 x 20 in
1981

Penny Machines
oil on canvas
23¾ x 29¾ in
1961

Stack of Books
oil on canvas
30 x 24 in
n.d.

Seven Suckers
oil on canvas
19 x 23 in
1970

Twin Jackpots
oil on canvas
30 x 46 in
1962

Ties
oil on canvas
20 x 26 in
1980

Cake Slices
oil on canvas
20 x 16 in
n.d.

Notes 6-10

For the year ended 31 December 2010

7. Taxation

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

  2010
£m
2009
£m
2008
£m
Corporation tax      
Current year 276.2 209.8 217.7
Prior years (1.0) (1.7) 7.0
  275.2 208.1 224.7
Deferred tax      
Current year (21.4) (16.1) (8.4)
Net credit in relation to the amortisation of acquired intangible assets and other goodwill items (37.5) (37.3) (12.4)
  (58.9) (53.4) (20.8)
Prior years (26.0) 1.0 29.0
  (84.9) (52.4) 8.2
Tax charge 190.3 155.7 232.9

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

  2010
£m
2009
£m
2008
£m
Profit before taxation 851.3 662.6 746.8
Tax at the corporation tax rate of 25%3 (2009: 25%3, 2008: UK 28.5%) 212.8 165.7 212.8
Tax effect of share of results of associates (13.8) (14.3) (13.4)
Tax effect of items that are not taxable (7.8) (63.7) (11.7)
Tax effect of utilisation or recognition of tax losses not previously recognised (47.5) (10.1) (6.5)
Effect of different tax rates of subsidiaries operating in other jurisdictions 15.4 23.7 3.5
Losses carried forward and temporary differences not recognised 58.2 55.1 12.2
Prior period adjustments (27.0) (0.7) 36.0
Tax charge 190.3 155.7 232.9
Effective tax rate on profit before tax 22.4% 23.5% 31.2%
Effective tax rate on headline PBT1,2 22.0% 23.8% 25.3%
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.
3
In November 2008, WPP introduced a new holding company that is tax resident in the Republic of Ireland. As a result, the tax reconciliation for the years ended 31 December 2010 and 31 December 2009 have been prepared using the Irish non-trading corporation tax rate of 25%, which is the rate applicable to WPP plc. In 2008 the reconciliation was prepared using the prevailing UK corporation tax rate of 28.5%.