Following a change in UK tax law, all dividends paid on or after 1 July 2009 from L&G Group companies will be exempt from UK tax. No UK tax liability will therefore arise in respect of any remittance of earnings from overseas subsidiaries. As such, no deferred tax liability is recognised on these profits. Furthermore, it is expected that no foreign tax will arise on the earnings in the jurisdiction of the foreign entity upon distribution and as such, no deferred tax has been provided in respect of foreign tax.

Unrecognised deferred tax assets

The Group has the following unrelieved tax losses carried forward as at 31 December 2010. No deferred tax asset has been recognised in respect of these tax losses as at 31 December 2010 (or 31 December 2009), as it is probable that there will be no suitable taxable profits emerging in future periods against which to relieve them. Relief for these tax losses will only be recognised if it becomes probable that suitable taxable profits will arise in future periods. The potential deferred tax asset unrecognised as at 31 December 2010 is £58m (2009: £32m).