Notes to the financial statements
8 Income tax expense
| 2008 £m |
2007 £m |
|
|---|---|---|
| Current tax expense | ||
| Current year | 173 | 2 |
| Over provision in prior years | (9) | (25) |
| 164 | (23) | |
| Deferred tax expense | ||
| Origination and reversal of temporary differences | - | 158 |
| Deferred tax rate change from 30% to 28% | (8) | – |
| (Over)/under provision in prior years | (6) | 18 |
| (14) | 176 | |
| Total income tax expense in income statement | 150 | 153 |
Income tax expense on underlying profit1 |
151 | 132 |
| Tax on items below: | ||
| Sale of properties | - | (3) |
| Financing fair value movements | (1) | 2 |
| Costs relating to approach from Delta Two | (2) | – |
| Fair value gain on other financial asset | 2 | – |
| Past service gains on defined benefit schemes | - | 22 |
| Total income tax expense in income statement | 150 | 153 |
- Tax charge attributable to underlying profit before tax from continuing operations.
The effective tax rate of 31.3 per cent (2007: 32.2 per cent) is higher than the standard rate of corporation tax in the UK. The differences are explained below:
| 2008 £m |
2007 £m |
|
|---|---|---|
| Profit before taxation | 479 | 477 |
Income tax at UK corporation tax rate of 30% (2007: 30%) |
144 | 143 |
| Effects of: | ||
| Disallowed depreciation on UK properties | 21 | 22 |
| Non-deductible expenses | 18 | 3 |
| Non-taxable income | - | (8) |
| Capital losses utilised | (10) | – |
| Deferred tax rate change from 30% to 28% | (8) | – |
| Over provision in prior years | (15) | (7) |
| Total income tax expense in income statement | 150 | 153 |
Income tax charged or credited to equity during the year is as follows:
| 2008 £m |
2007 £m |
|
|---|---|---|
| Share-based payment tax recognised directly in equity | ||
| Current tax payable | (5) | (2) |
| Deferred tax asset | 19 | (7) |
| Prior year adjustment | (13) | – |
| Deferred tax rate change from 30% to 28% | 1 | – |
| Deferred tax losses associated with share-based payment tax deduction | 8 | (8) |
| 10 | (17) | |
| Deferred tax on items recognised directly in equity | ||
| Actuarial gains on defined benefit pension schemes | 161 | 52 |
| Available-for-sale financial assets fair value movements | 3 | 7 |
| Deferred tax rate change from 30% to 28% - defined benefit pension scheme | (10) | – |
| Deferred tax rate change from 30% to 28% - available-for-sale financial assets | (2) | – |
| 152 | 59 | |
| 162 | 42 |