Notes to the accounts
for the year ended 31 December 2007
23. Deferred tax
(a) Deferred tax liabilities
Deferred tax liabilities represent temporary differences, including bonuses.
| 2007 £mn |
2006 £mn |
|
|---|---|---|
| At 1 January | (2.4) | (2.8) |
| Exchange translation adjustments | (0.2) | 0.1 |
| Income statement expense | (1.0) | - |
| Transfers | 0.9 | 0.3 |
| At 31 December | (2.7) | (2.4) |
| 2007 | ||||
|---|---|---|---|---|
| (b) Deferred tax assets | Accelerated capital allowances £mn |
Temporary differences including bonuses £mn |
Tax losses carried forward £mn |
Total £mn |
| At 1 January | 6.1 | 37.1 | 1.2 | 44.4 |
| Exchange translation adjustments | - | 0.7 | - | 0.7 |
| Changes in timing differences - income statement (expense)/credit | (1.3) | 0.7 | 1.6 | 1.0 |
| Effect of changes in tax rates - income statement expense | (0.3) | (1.2) | (1.3) | (2.8) |
| Debit taken to equity | - | (0.5) | - | (0.5) |
| Effect of changes in tax rates - debit taken to equity | - | (0.8) | - | (0.8) |
| Acquisitions | - | 1.7 | - | 1.7 |
| Transfers | - | (0.9) | - | (0.9) |
| At 31 December | 4.5 | 36.8 | 1.5 | 42.8 |
| 2006 | ||||
|---|---|---|---|---|
| Accelerated
capital allowances £mn |
Temporary
differences including bonuses £mn |
Tax losses
carried forward £mn |
Total £mn |
|
| At 1 January | 8.5 | 43.8 | 2.6 | 54.9 |
| Exchange translation adjustments | - | (0.6) | - | (0.6) |
| Income statement credit/(expense) | (2.4) | (6.3) | (1.4) | (10.1) |
| Credit taken to equity | - | 0.5 | - | 0.5 |
| Transfers | - | (0.3) | - | (0.3) |
| At 31 December | 6.1 | 37.1 | 1.2 | 44.4 |
A legislative change in the UK has reduced the main corporation tax rate from 30 per cent. to 28 per cent., with effect from 1 April 2008. The effect of this is that the value of UK deferred tax assets has reduced, resulting in a tax charge in the current period.
Included in deferred tax assets relating to temporary differences including bonuses is an asset relating to UK tax deductions for sharebased remuneration which are dependent on the prices of Schroders' ordinary and non-voting ordinary shares at the time the awards are exercised. These have been recognised based on the share prices as at 31 December 2007. Subsequent to the end of the period, Schroders share prices have fallen. If the assets were recognised at the share price on 10 March 2008, the deferred tax assets would be reduced by £12.5 million.
A deferred tax asset of £16.3 million (2006: £10.4 million) relating to realised and unrealised capital losses has not been recognised as there is insufficient evidence that there will be sufficient taxable gains in the future against which the deferred tax asset could be utilised.
A deferred tax asset of £21.4 million (2006: £20.5 million) relating to losses and other temporary differences has not been recognised as there is insufficient evidence that there will be sufficient taxable profit against which these losses and temporary differences can be utilised. This unrecognised deferred tax includes an amount of £15.1 million (2006: £13.9 million) relating to US losses of £33.5 million (2006: £30.3 million), which are subject to a minimum expiry period of 13 years.
The aggregate amount of gross temporary differences regarding investments in subsidiaries is £164.3 million (2006: £230.6 million). Deferred tax has not been provided as the relevant parent company is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
A deferred tax asset of £5.6 million (2006: £5.0 million) relating to Excess Unrelieved Foreign Tax has not been recognised as there is insufficient evidence that there will be sufficient taxable profit in the future against which the deferred tax asset could be utilised.