QBE European Operations plc

QBE European Operations plc Annual report 2011
64
Notes to the financial statements
continued
For the year ended 31 December 2011
11 Tax on profit on ordinary activities
2011 2010
Analysis of (credit)/charge in period £000 £000
Current tax:
UK Corporation Tax 12,643 26,757
Adjustments to tax in respect of prior period (173,947) (657)
Double tax relief – (1,704)
(161,304) 24,396
Foreign tax 20,729 11,074
Adjustments to tax in respect of prior period (6,640) 382
14,089 11,456
Total current tax (147,215) 35,852
Deferred tax:
Origination and reversal of timing differences (21,033) (25,109)
Impact from change in UK tax rate (17,958) (2,545)
Adjustments to tax in respect of prior period 174,280 10,913
Total deferred tax 135,289 (16,741)
Tax (credit)/charge on profit on ordinary activities (11,926) 19,111
Factors affecting tax (credit)/charge for the period
The current year charge for the period is lower (2010 lower) than the standard rate of corporation tax in the UK, 26.5% (2010 28%). The differences are
explained below:
2011 2010
£000 £000
Profit on ordinary activities before tax 83,191 213,163
Profit on ordinary activities before tax multiplied by standard rate of UK corporation tax of 26.5% (2010 28%) 22,045 59,686
Effects of:
Difference in tax rate 546 209
Expenses not deductible for tax purposes 4,139 615
Income exempt from tax (20,111) (23,926)
Tax effect on foreign exchange expense 27,465 (18,491)
Other timing differences 336 25,109
Other permanent differences 4,422 2,948
Overseas tax rate adjustments (5,470) (10,023)
Adjustments to tax in respect of prior period (180,587) (275)
Current tax (credit)/charge for year (147,215) 35,852
The Group’s subsidiary undertaking, QBE Corporate Limited, has resubmitted its corporation tax returns for the years ended 31 December 2007, 2008
and 2009 following change in HM Revenue & Customs’ guidance. As a result, there are prior period timing adjustments included in the accounts.
During the year, as a result of the changes in the UK main corporation tax rate to 26% that was substantively enacted on 29 March 2011 and that was
effective from 1 April 2011 and to 25% that was substantively enacted on 5 July 2011 and that will be effective from 1 April 2012, the relevant deferred
tax balances have been remeasured.
Further reduction to the UK corporation tax rate were announced in the March 2012 Budget. The changes, which are expected to be enacted
separately each year, propose to reduce the rate to 22% by 1 April 2014. The changes had not been substantively enacted at the balance sheet date
and therefore are not recognised in these financial statements. Had they been substantively enacted they would have reduced the deferred tax liability
at the period end by £9.1 million. The impact of these changes in future periods will be dependent on the level of taxable profits in those periods.