Notes to the accounts
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22 Deferred tax liabilities
Income taxes
Under IAS 12 (Income Taxes), provision is made for the deferred tax liability associated with the revaluation of investment properties at the corporate tax rate expected to apply to the group at the time of use. For those properties qualifying as REIT properties the relevant tax rate will be 0 per cent (2006 – 0 per cent), for other UK properties the relevant tax rate will be 28 per cent (2006 – 30 per cent) and for overseas properties the relevant tax rate will be the prevailing corporate tax rate in that country.
The deferred tax provision on the revaluation of investment properties calculated under IAS 12 is £35.8 million at 31 December 2007 (2006 – £32.1 million). This IAS 12 calculation does not reflect the expected amount of tax that would be payable if the assets were sold. The group estimates that calculated on a disposal basis the liability is £86.8 million at 31 December 2007 (2006 – £49.1 million). If upon sale the group retained all the capital allowances, which is within the control of the group, the deferred tax provision in respect of capital allowances of £49.9 million may also be released, and further capital allowances of £25.9 million may be available to reduce the amount of tax payable on sale.
Where gains such as revaluation of development properties and other assets and actuarial movements on pension funds are dealt with in reserves, any deferred tax is also dealt with in reserves.
| Movements in the provision for deferred tax | 31 December 2006 £m |
Recognised in income £m |
Acquisition of subsidiaries £m |
Recognised in equity £m |
31 December 2007 £m |
|---|---|---|---|---|---|
| Revaluation of investment and development property | 32.1 | 4.2 | – | (0.5) | 35.8 |
| Capital allowances | 31.8 | 4.5 | 14.9 | (1.3) | 49.9 |
| Derivative financial instruments | (32.2) | 15.6 | 1.9 | – | (14.7) |
| Other temporary differences | 9.1 | (0.5) | (5.2) | (0.7) | 2.7 |
| Net deferred tax provision | 40.8 | 23.8 | 11.6 | (2.5) | 73.7 |
| 31 December 2005 £m |
Recognised in income £m |
Acquisition of subsidiaries £m |
Recognised in equity £m |
31 December 2006 £m |
|
|---|---|---|---|---|---|
| Revaluation of investment and development property | 817.4 | (787.2) | – | 1.9 | 32.1 |
| Capital allowances | 95.7 | (60.9) | – | (3.0) | 31.8 |
| Derivative financial instruments | (83.4) | 51.2 | – | – | (32.2) |
| Other temporary differences | 26.5 | (17.6) | – | 0.2 | 9.1 |
| Net deferred tax provision | 856.2 | (814.5) | – | (0.9) | 40.8 |
All deferred tax balances are expected to be recovered after more than one year.