41 Deferred tax.

Deferred tax assets and (liabilities) have been recognised/(provided) for the temporary differences and unused tax losses. 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 to the extent it is permissible under the accounting standard. The net movement in deferred tax assets and liabilities during the year is as follows:

(i) UK deferred tax asset

(XLS:) Deferred tax – UK deferred tax asset 2012

 

Net tax asset
as at
1 January
2012
£m

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

Tax (charged)/
credited to equity
£m

Net tax asset
as at
31 December
2012
£m

Realised and unrealised losses on investments

147

(133)

14

Excess of depreciation over capital allowances

43

43

Excess expenses

233

1

234

Deferred acquisition expenses

(80)

6

(3)

(77)

Difference between the tax and accounting value of insurance contracts

(72)

(27)

(99)

Accounting provisions

9

9

Trading losses

159

(31)

128

Pension fund deficit

72

(7)

11

76

Purchased interest in long term business

(18)

6

(12)

UK deferred tax asset

493

(185)

8

316

(XLS:) Deferred tax – UK deferred tax asset 2011

 

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

(ii) Overseas deferred tax liabilities

(XLS:) Deferred tax – overseas deferred tax liabilities 2012

 

Net tax liability
as at 1 January
2012
£m

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

Tax (charged)/ credited to equity
£m

Net tax liability as at 31 December
2012
£m

Realised and unrealised gains on investments

(57)

(7)

(20)

(84)

Deferred acquisition expenses

(217)

(22)

17

(222)

Difference between the tax and accounting value of insurance contracts

(303)

17

22

(264)

Trading losses

246

(43)

(18)

185

Pension fund deficit

4

(1)

3

Overseas deferred tax liabilities

(327)

(56)

1

(382)

(XLS:) Deferred tax – overseas deferred tax liabilities 2011

 

Net tax liability
as at
1 January
2011

£m

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

Tax (charged)/ credited to equity
Restated
£m

Net tax liability as at 31 December
2011
Restated
£m

Realised and unrealised gains on investments

(58)

5

(4)

(57)

Deferred acquisition expenses

(268)

(20)

71

(217)

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)

(36)

65

(327)

Unrecognised deferred tax assets

The Group has the following unrelieved tax losses carried forward as at 31 December 2012. No deferred tax asset has been recognised in respect of these tax losses as at 31 December 2012 (or 31 December 2011), 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 2012 is £51m (2011: £44m).

(XLS:) Deferred tax – unrecognised deferred tax assets

 

Gross
2012
£m

Tax
2012
£m

Gross
2011
£m

Tax
2011
£m

Trading losses

24

3

Realised and unrealised losses on investments

186

40

154

34

Post cessation losses

19

4

19

5

Unrelieved expenses

5

1

5

1

Unrelieved interest payments on debt instruments

14

3

16

4

Unrecognised deferred tax asset

248

51

194

44