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Notes to the consolidated
financial statements
continued
29 Tax expense continued
The standard rate of corporation tax in Bermuda is 0% whereas the effective rate of tax for the Group is 12.5% (2008: 32.7%).
A reconciliation of the difference is provided below:
92 Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2009
2009 2008
£000 £000
Profit before tax 320,618 105,180
Tax calculated at the standard corporation tax rate applicable in Bermuda: 0% (2008: 0%) – –
Effects of:
Tax on profits arising in the UK at 28% 47,770 45,790
Overseas tax losses for which a deferred tax asset is recognised (8,081) (1,681)
Other items (99) 466
Other overseas taxes (2,706) –
Prior year tax adjustments 3,237 (10,203)
Tax charge for the period 40,121 34,372
30 Deferred tax
2009 2008
Deferred tax assets £000 £000
Trading losses in overseas entities 14,077 5,996
The deferred tax asset relates to losses arising in overseas entities and is subject to overseas relief against future profits. Management
consider it probable that taxable profits will arise in future in order to utilise the deferred tax asset.
2009 2008
Net deferred tax liabilities £000 £000
Deferred tax assets 17,658 21,804
Deferred tax liabilities (87,331) (96,449)
Total net deferred tax liability (69,673) (74,645)
Deferred tax assets and deferred tax liabilities relating to the same tax authority are presented net in the Group’s balance sheet.
(a) Group deferred tax assets analysed by balance sheet headings
Income
statement Transfer to
2008 (charge)/credit equity 2009
At 31 December £000 £000 £000 £000
Trading losses in overseas entities 5,996 8,081 – 14,077
Deferred tax assets 5,996 8,081 – 14,077
Income
statement Transfer to
2008 (charge)/credit equity 2009
At 31 December £000 £000 £000 £000
Tangible assets 863 741 – 1,604
Trade and other payables 4,050 (4,050) – –
Retirement benefit obligations – 1,310 – 1,310
Intangible assets – Syndicate capacity 4,715 (485) – 4,230
Other items 12,176 (1,461) (201) 10,514
Total deferred tax assets 21,804 (3,945) (201) 17,658