Financial Statements

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

8. Tax

Tax (credited to)/charged in the income statement for continuing operations is analysed as follows:

2008
£m
2007
(restated)
£m
Current tax:  
UK corporation tax: Current year (124.3) 85.6
Prior years 6.0 (9.4)
Relief for foreign tax   (5.0)
Foreign tax: Current year (22.8) 18.0
Prior years 16.9
(141.1) 106.1
Deferred tax:  
UK: Current year 32.7 (8.6)
Prior years 4.9
Foreign: Current year 31.8 80.9
Prior years (9.9)
64.5 67.3
(76.6) 173.4

Corporation tax is calculated at 28.5% (2007: 30%) of the estimated assessable loss (2007: profit) for the year in the UK. Taxation outside the UK is calculated at the rates prevailing in the respective jurisdictions.

Deferred tax recognised in the Group statement of recognised income and expense is due to actuarial gains on post-retirement liabilities at the prevailing rate in the relevant jurisdiction, and the write off of the deferred tax asset relating to post-retirement liabilities. This includes the effect of the change in the UK rate of corporation tax from 30% to 28% from 1 April 2008.

The (credit)/charge for the year can be reconciled to the loss per the income statement as follows: 2008
£m
2007
(restated)
£m
Loss before tax (1,969.7) (33.6)
Tax at the UK corporation tax rate of 28.5% (2007: 30%) (561.4) (10.1)
Under provision in respect of prior years 6.0 3.5
Tax effect of share of results of joint ventures (2.6)
Tax effect of expenses that are not deductible in determining taxable profit 205.6 14.0
Non-taxable income (8.4) (18.5)
Effect of higher rates of tax of subsidiaries operating in other jurisdictions (1.4) (14.5)
Losses not recognised 217.2 12.1
Net reduction in deferred tax assets previously recognised 65.8 189.4
Other 0.1
Tax (credit)/charge for the year (76.6) 173.4

The tax credit for the year includes an amount in respect of exceptional items of £100.0m (2007: £70.2m charge). This is made up of a credit of £91.6m (2007: £14.9m) in respect of UK tax and a credit of £8.4m (2007: £85.1m charge) in respect of US tax.

The charge in the UK and the US reflects a write off of deferred tax assets held by the Group, the utilisation of which is not seen as probable in the foreseeable future primarily due to the continued and significant weakening of the UK and US markets in the second half of 2008.