Financial Statements

Notes to the Consolidated Financial Statementsfor the year to 31 December 2008

16.Deferred tax

The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year.

Capital allowances
Short term timing differences
Inventory adjustments
Retirement benefit obligations
At 1 January 2007 3.1 14.0 8.9 68.6 94.6
Credit/(charge) to income 0.4 (15.0) 11.4 (54.9) (10.1) (68.2)
Charge to equity (2.6) (29.6) (32.2)
Acquisition of subsidiaries 0.7 12.8 (41.2) 85.6 34.5 92.4
Changes in exchange rates 0.8 0.5 1.3
At 31 December 2007 4.2 10.0 (29.8) 40.1 63.4 87.9
(Charge)/credit to income (5.5) (3.0) 29.8 (46.1) (39.7) (64.5)
Charge to equity (23.7) (23.7)
Disposal of subsidiaries (0.4) (0.4)
Changes in exchange rates 6.0 6.0
At 31 December 2008 (1.3) 6.6 5.3

The £23.7m charge to equity comprises a credit of £23.5m in respect of deferred tax on actuarial losses on defined benefit pension schemes taken to the statement of recognised income and expense during the year, and a charge of £47.2m in respect of the write off of the deferred tax asset on retirement benefit obligations.

The recognition of deferred tax assets on capital allowances, short term timing differences and inventory write downs reflects the amount the Group believes is probable to be utilised in the UK and US in future years, which has been assessed in light of the weakening market and general worsening economic conditions in the second half of 2008.

In addition, the deferred tax liability on brands has reduced to nil (2007: £29.8m) as a result of the impairment of those brands. The deferred tax asset recognised on the UK retirement benefit obligations has reduced to nil (2007: £63.4m at 28%), due to a lack of visibility over the ability to recover the scheduled deficit repair payments.

The net deferred tax balance is analysed into assets and liabilities as follows:

Deferred tax assets 6.6 117.7
Deferred tax liabilities (1.3) (29.8)
5.3 87.9

At the balance sheet date, the Group has unused UK capital losses of £409.2m (2007: £418.0m), of which £271.7m (2007: £296.8m) are agreed as available for offset against future capital profits. No deferred tax asset has been recognised in respect of these losses because the Group does not believe that it is probable that these capital losses will be utilised in the foreseeable future. In addition, some of the capital losses would be further restricted as to offset dependent on the source within the Taylor Wimpey Group of any gains and previous losses.

The Group has not recognised potential deferred tax assets relating to inventory charges, pension liabilities and tax losses carried forward amounting to £248.3m (2007: nil) in the UK and £303.6m (2007: £189.4m) in the US and £17.3m (2007: £9.7m) in other jurisdictions. Local tax legislation permits losses to be carried forward 20 years in the US, 15 years in Spain and indefinitely in the UK.

Temporary differences arising in connection with interests in associates and joint ventures are insignificant, therefore no deferred tax balance has been recognised.