11 Income tax expense/(credit).

The Group uses estimates to apportion the income tax expense of Society between the elements attributable to policyholder returns and equity holders’ profits. The net equity holders’ profit from UK long term business has borne tax at the effective equity holder tax rate. For participating business and certain non profit business this is sufficiently close to the standard rate of UK corporation tax for that rate to be used in the financial statements. For the remaining non profit business, the effective equity holder tax rate is used. For equity holders’ funds within Society’s [LTF], the equity holder income tax is the income tax attributed to the return on those funds. The balance of income taxes associated with UK long term business profits is then classified as income tax attributable to policyholders’ returns.

There is no definitive method of calculating the effective equity holder tax rate. A number of alternative methods are consistently used in order to assess the validity of using the standard rate of UK corporation tax.

The tax assessed for the year is higher (2008: lower) than the standard corporation tax rate applicable to companies operating in the UK of 28% (2008: 28.5%). The differences are explained below:

A surplus of £469m has been declared in the period by Society’s LTF, which represents the full balance of the [SRC]. As such, no deferred tax liability exists at the balance sheet date.