24 DEFERRED TAX.


Deferred tax assets and (liabilities) have been recognised/(provided) for the temporary differences and unused tax losses as detailed below. The recognition of a deferred tax asset in respect of tax losses is supported by management’s best estimate of future taxable profits to absorb the losses in future years. These taxable profit projections are based on assumptions consistent with those used for [EEV] reporting purposes. Deferred tax assets and (liabilities) have been offset only to the extent the underlying income and expense items can be legally offset when the timing differences reverse. The net movement in deferred tax assets and liabilities during the year is as follows:

(i) UK deferred tax asset

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Net tax asset as at 1 January 2011
£m

Tax (charged)/ credited to the income statement
£m

Tax (charged)/ credited to equity
£m

Net tax asset as at 31 December 2011
£m

Realised and unrealised losses on investments

31

116

147

Excess of depreciation over capital allowances

43

43

Excess expenses

284

(57)

6

233

Deferred acquisition expenses

(87)

7

(80)

Difference between the tax and accounting value of insurance contracts

(66)

(6)

(72)

Accounting provisions

8

1

9

Trading losses

239

(80)

159

Pension fund deficit

66

(9)

15

72

[Purchased interest in long term business]

(23)

5

(18)

UK deferred tax asset

495

(23)

21

493

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Net tax asset as at 1 January 2010
£m

Tax (charged)/ credited to the income statement
£m

Tax (charged)/ credited to equity
£m

Net tax asset as at 31 December 2010
£m

Realised and unrealised losses on investments

145

(114)

31

Excess of depreciation over capital allowances

42

1

43

Excess expenses

311

(37)

10

284

Deferred acquisition expenses

(95)

8

(87)

Difference between the tax and accounting value of insurance contracts

(44)

(22)

(66)

Accounting provisions

8

8

Trading losses

378

(139)

239

Pension fund deficit

79

(16)

3

66

Purchased interest in long term business

(28)

5

(23)

UK deferred tax asset

796

(314)

13

495

(ii) Overseas deferred tax liabilities

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Net tax
liability
as at 1
January
2011
£m

Tax
(charged)/
credited
to the income
statement
£m

Tax
(charged)/
credited
to equity
£m

Net tax
liability
as at 31
December
2011
£m

Realised and unrealised gains on investments

(58)

5

(4)

(57)

Deferred acquisition expenses

(268)

(21)

(4)

(293)

Difference between the tax and accounting value of insurance contracts

(51)

(244)

(8)

(303)

Trading losses

15

225

6

246

Pension fund deficit

6

(2)

4

Overseas deferred tax liabilities

(356)

(37)

(10)

(403)

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Net tax
liability
as at 1
January
2010
£m

Tax
(charged)/
credited
to the income
statement
£m

Tax
(charged)/
credited
to equity
£m

Net tax
liability
as at 31
December
2010
£m

Realised and unrealised gains on investments

(45)

(13)

(58)

Deferred acquisition expenses

(244)

(16)

(8)

(268)

Difference between the tax and accounting value of insurance contracts

(133)

86

(4)

(51)

Trading losses

119

(108)

4

15

Pension fund deficit

6

6

Overseas deferred tax liabilities

(303)

(32)

(21)

(356)

Unrecognised deferred tax assets

The Group has the following unrelieved tax losses carried forward as at 31 December 2011. No deferred tax asset has been recognised in respect of these tax losses as at 31 December 2011 (or 31 December 2010), as it is not probable that there will be 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 2011 is £44m (2010: £58m).

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Gross
2011
£m

Tax
2011
£m

Gross
2010
£m

Tax
2010
£m

Trading losses

33

10

Realised and unrealised losses on investments

154

34

77

15

Post cessation losses

19

5

14

4

Unrelieved expenses

5

1

124

25

Unrelieved interest payments on debt instruments

16

4

14

4

Unrecognised deferred tax asset

194

44

262

58

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