Notes to the accounts
8. Taxation
| 2008 $m |
2007 $m |
2006 $m |
||
|---|---|---|---|---|
| Profit before tax: | UK | 132.8 | 119.4 | 92.0 |
| US | 200.7 | 281.4 | 268.7 | |
| 333.5 | 400.8 | 360.7 | ||
| Current taxation: | UK | 42.0 | 30.7 | 20.7 |
| US | 67.5 | 105.8 | 108.0 | |
| Deferred taxation: | UK | (2.2) | (2.8) | 2.5 |
| US | 11.0 | 1.1 | (5.9) | |
| 118.3 | 134.8 | 125.3 | ||
The sources of deferred taxation are as follows:
| 2008 $m |
2007 $m |
2006 $m |
|
|---|---|---|---|
| UK property, plant and equipment | (2.5) | (0.8) | 2.3 |
| US property, plant and equipment | (2.6) | (3.0) | (1.8) |
| Inventory valuation | 21.3 | 16.5 | 8.7 |
| Allowances for doubtful debts | (3.2) | (2.3) | (2.0) |
| Revenue deferral (extended service agreements) | (5.5) | (4.1) | (3.8) |
| Straight line lease payments | (2.2) | (2.4) | (2.0) |
| Deferred compensation | (1.7) | (1.5) | (1.6) |
| Retirement benefit obligations | (0.4) | (1.5) | – |
| Other temporary differences | 5.6 | (2.6) | (3.2) |
| 8.8 | (1.7) | (3.4) |
The differences between the standard rate of corporation tax in the UK and the current and effective tax rates for the Group are explained below:
| 2008 % |
2007 % |
2006 % |
|
|---|---|---|---|
| UK statutory tax rates | 30.0 | 30.0 | 30.0 |
| Expenditure permanently disallowable for tax purposes, net of permanent undercharges | 1.5 | 0.3 | 1.5 |
| Differences between UK and US (including state) standard tax rates | 5.0 | 5.5 | 5.5 |
| Over provision in respect of previous periods | (1.0) | (2.2) | (2.3) |
| UK property, plant and equipment | 0.7 | 0.2 | (0.6) |
| US property, plant and equipment | 0.8 | 0.7 | 0.5 |
| Inventory valuation | (6.4) | (4.1) | (2.4) |
| Allowances for doubtful debts | 1.0 | 0.6 | 0.5 |
| Revenue deferral (extended service agreements) | 1.6 | 1.0 | 1.0 |
| Straight line lease payments | 0.7 | 0.6 | 0.5 |
| Deferred compensation | 0.5 | 0.4 | 0.5 |
| Retirement benefit obligations | 0.1 | 0.4 | – |
| Other temporary differences | (1.6) | 0.6 | 0.9 |
| Current tax rate | 32.9 | 34.0 | 35.6 |
| Deferred tax rate | 2.6 | (0.4) | (0.9) |
| 35.5 | 33.6 | 34.7 |
The Group's effective tax rate is higher than the UK statutory tax rate because a significant proportion of the Group's business is conducted in the US where the combined federal and state tax rate approaches 40%. The Group's future effective tax rate is dependent on changes in the geographic mix of profits and the movement in foreign exchange translation rates. It is likely that there will be greater volatility in the Group's effective tax rate going forward owing to changes in the tax environment in both the UK and the US. It is anticipated that, subject to the outcome of various uncertain tax positions, the Group's effective tax rate in 2008/09 will be at a similar level to the reported effective tax rate in 2007/08.