Vodafone 2007 Annual Report Download - page 107

Vodafone Group Plc Annual Report 2007 105
Financials
Deferred tax
Analysis of movements in net deferred tax balance during the year:
2007
£m
1 April 2006 (5,530)
Credited to the income statement 690
Charged to the statement of recognised income and expense (11)
Acquisitions and disposals (5)
Deferred tax relating to discontinued operations 145
Transfer due to deconsolidation 108
Exchange movements 387
31 March 2007 (4,216)
Deferred tax assets and liabilities in respect of continuing operations, before offset of balances within countries, are as follows:
Gross Less: Net recognised Amount credited/
Gross deferred deferred tax amounts deferred tax (charged) in
tax asset liability unrecognised asset/(liability) income statement
31 March 2007: £m £m £m £m £m
Accelerated tax depreciation 386 (1,720) (25) (1,359) 112
Tax losses 13,619 −(13,334) 285 (264)
Deferred tax on overseas earnings −(3,296) −(3,296) 373
Other short term timing differences 4,147 (1,615) (2,378) 154 469
18,152 (6,631) (15,737) (4,216) 690
Analysed in the balance sheet, after offset of balances within countries, as:
£m
Deferred tax asset 410
Deferred tax liability (4,626)
(4,216)
Gross Less: Net recognised Amount credited/
Gross deferred deferred tax amounts deferred tax (charged) in
tax asset liability unrecognised asset/(liability) income statement
31 March 2006: £m £m £m £m £m
Accelerated tax depreciation 155 (1,702) (48) (1,595) (91)
Tax losses 9,565 −(9,191) 374 (85)
Deferred tax on overseas earnings −(4,025) −(4,025) (318)
Other short term timing differences 4,073 (1,418) (2,939) (284) (73)
13,793 (7,145) (12,178) (5,530) (567)
Analysed in the balance sheet, after offset of balances within countries, as:
£m
Deferred tax asset 140
Deferred tax liability (5,670)
(5,530)
Factors affecting the tax charge in future years
Factors that may affect the Group’s future tax charge include one-off restructuring benefits, the resolution of open issues, future planning opportunities,
corporate acquisitions and disposals, changes in tax legislation and rates, and the use of brought forward tax losses.
In particular, the Group’s subsidiary Vodafone 2 is responding to an enquiry by HM Revenue & Customs (“HMRC”) with regard to the UK tax treatment of one of
its Luxembourg holding companies under the controlled foreign companies (“CFC”) rules. Further details in relation to this enquiry are included in note 31
“Contingent liabilities”. At 31 March 2007, the Group holds provisions of £1,718 million tax and £400 million interest in respect of the potential UK tax liability
that may arise from this enquiry (2006: £1,822 million tax and £276 million interest). In September 2006, ruling in the case of Cadbury Schweppes, the
European Court of Justice provided guidance as to the allowable application of the UK CFC rules. Considering the facts of the Vodafone 2 case and the ECJ
ruling in Cadbury Schweppes, management considers these amounts are sufficient to settle any assessments that may result from the enquiry. However, the
amount ultimately paid may differ materially from the amount accrued and could therefore affect the overall profitability and cash flows of the Group in future
periods.