62 | FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements


9. Income tax (a) Analysis of tax income in the year The major components of tax (income)/expense recognised in the Income Statement and Statement of Changes in Equity are:


2011 £m


Current income tax: UK


Overseas Adjustments in respect of previous years


Deferred income tax: Relating to origination and reversal of temporary differences Adjustments in respect of previous years


Adjustments in respect of Corporation Tax rate change Tax income reported in the Income Statement


3.7 5.7


(0.1)


(12.7) 0.1


(0.8) (4.1)


2011 £m


Deferred and current income tax related to items charged or credited directly to equity: Fair value movements on financial investments


Net actuarial gains on defined benefit pension schemes Loss on overseas pension schemes


Adjustments in respect of Corporation Tax rate change


Tax expense recognised directly in the Statement of Comprehensive Income Tax credit associated with purchase of NCI* in F&C Partners LLP


Tax (income)/expense recognised directly in Statement of Changes in Equity * Non-controlling interests (NCI).


(0.5) 1.0


(0.3) 0.3


0.5


(2.9) (2.4)


(b) Factors affecting the tax income for the year A reconciliation between the actual tax income and the accounting loss multiplied by the Group’s domestic tax rate for the years ended 31 December 2011 and 2010 is as follows:


2011 £m


Loss before tax


At the Group’s statutory income tax rate of 26.5% (2010: 28.0%) Adjustments in respect of previous years Disallowed expenses Non-taxable income Overseas tax


Unrecognised losses Share-based payments


Disallowed distributions to LLP members


Non-taxable income attributable to LLP members Corporation Tax rate change


Tax income reported in the Income Statement Deferred tax assets and liabilities are shown in note 17.


(c) Effective rate of tax and factors affecting future tax charges The Chancellor of the Exchequer’s Emergency Budget on 22 June 2010 announced that the UK Corporation Tax rate will reduce from 28% to 24% over a period of four years from 2011. A further 1% reduction in the UK Corporation Tax rate was announced in the Chancellor’s Budget of 23 March 2011. The combination of these announcements when substantively enacted will take the Group’s UK effective tax rate to 23% by 2015.


The first tranche of these reductions became effective during 2011 when the Corporation Tax rate moved from 28% to 26% on 1 April 2011, leading to a statutory tax rate in the UK for the Group of 26.5% for 2011.


A further rate change to 25% was substantively enacted on 5 July 2011, effective from 1 April 2012. As a result, the statutory rate for the UK Group will move to 25.25% for 2012.


The effect of the rate changes substantively enacted during the year has been to reduce the net deferred tax liability by a net £0.5m as at 31 December 2011. This comprises a £2.8m tax credit attributable to intangible assets, a £2.0m tax charge associated with the reduction in value of deferred tax assets and a £0.3m tax charge to equity reflecting the deferred tax that is expected to reverse through equity.


The Directors are of the view that due to the significant level of estimation required it is not yet possible to quantify the effect of the proposed subsequent 2% rate reduction in future years, although this will further reduce the Group’s current tax charge in future and reduce the Group’s deferred tax assets and liabilities recognised in the Statement of Financial Position.


(1.5) (0.4)


– 0.2


(3.0) 0.2 0.1


(0.4) 4.9


(4.9) (0.8)


(4.1)


2010 £m


(19.2) (5.4)


(1.5) 3.4


(1.6) 0.1 0.1


(0.1) 1.7


(1.7) (0.8)


(5.8)


2010 £m


0.8 8.5


(0.2)


(12.8) (1.3) (0.8)


(5.8)


2010 £m


0.3 3.0 –


0.2 3.5


– 3.5


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