35 Tax.

The tax shown in the consolidated income statement comprises current and deferred tax.

Current Tax

Current tax comprises tax payable on current period profits, adjusted for non-tax deductible or non-taxable items, and any adjustments to tax payable in respect of previous periods. Current tax is recognised in the income statement unless it relates to items which are recognised in other comprehensive income.

Deferred Tax

Deferred tax is calculated on differences between the accounting value of assets and liabilities and their respective tax values. Deferred tax is also recognised in respect of unused tax losses to the extent it is probable that future taxable profits will arise against which the losses can be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity.

The tax shown in the income statement has been apportioned between that attributable to policyholders and that attributable to equity holders.

The judgements made in arriving at tax balances in the financial statements are discussed in Notes 41 and 42 where relevant.

Tax Rates

The table below provides a summary of the current tax and deferred tax rates for the year.

(XLS:) Tax – rates

 

2012

2011

 

Current tax

Deferred tax

Current tax

Deferred tax

UK

24.5%

23.0%

26.5%

25.0%

USA

35.0%

35.0%

35.0%

35.0%

France

36.1%

34.4%

34.4%

34.4%

Netherlands

25.0%

25.0%

25.0%

25.0%

Ireland

12.5%

12.5%

12.5%

12.5%

(XLS:) Tax

 

Note

2012

£m

2011
Restated
£m

1.

The total movement in deferred tax of £232m disclosed above differs from the amount of £241m disclosed in Note 41 by £9m (2011: £60m) being the deferred tax prior year adjustment included within the ‘Adjustment to equity holders’ tax in respect of prior years’ line.

Current tax

 

183

89

 

 

 

 

Deferred tax

 

 

 

– Movement in temporary differences

 

225

(7)

– Reduction in UK corporate tax rate to 23% (2011: 25%)

 

7

6

Total deferred tax1

41

232

(1)

 

 

 

 

Adjustment to equity holders tax in respect of prior years

 

(6)

(34)

Total tax

 

409

54

Less tax attributable to policyholder returns

 

(174)

178

Tax attributable to equity holders

 

235

232

The tax attributable to equity holders differs from the tax calculated at the standard UK corporation tax rate as follows:

(XLS:) Tax – Differences in income tax calculation

 

2012

£m

2011
Restated
£m

Profit before tax attributable to equity holders

1,036

953

Tax calculated at 24.5% (2011: 26.5%)

254

253

Effects of:

 

 

Adjustments in respect of prior years, mainly relating to
resolution of tax issues with HMRC

(6)

(34)

Lower tax on Shareholder Retained Capital

(30)

(20)

Income not subject to tax, such as dividends

(3)

(5)

Change in valuation of tax losses

8

15

Higher rate of tax on profits taxed overseas

14

11

Expenses not deductible for tax purposes

(5)

5

Impact of reduction in UK corporate tax rate to 23% (2011: 25%)
on deferred tax balances

7

6

Differences between taxable and accounting investment gains,
e.g. RPI relief

(5)

Other

1

1

Tax attributable to equity holders

235

232

Tax calculated on profit before tax at 24.5% (2011: 26.5%) would amount to £296m (2011: £205m). The difference between this number and the total tax of £409m (2011: £54m) is made up of the reconciling items above, which total £(19)m (2011: £(21)m), and the effect of the apportionment methodology on tax applicable to policyholder returns of £132m (2011: £(130)m).

(XLS:) Tax – equity holders’ effective tax rate

 

2012
%

2011
%

Equity holders’ effective tax rate

22.7

24.4

Equity holders’ effective tax rate is calculated by dividing the tax attributable to equity holders over profit before tax attributable to equity holders.

(XLS:) Tax – deferred tax recognised directly in equity

Deferred tax recognised directly in equity

2012

£m

2011
Restated
£m

Relating to net gains or losses recognised directly in equity

(22)

(91)

Exchange gains

13

5

Deferred tax recognised directly in equity

(9)

(86)