Notes to the accounts

For the year ended 31st December 2007


19 Current and deferred tax

The components of taxes are as follows:

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2007 2006
Assets  Liabilities  Assets  Liabilities 
£m  £m  £m  £m 
Current tax  518  1,311  557  1,020 
Deferred tax  2,334  1,726  2,005  1,523 

Deferred taxes are calculated on all temporary differences under the liability method. The movement on the deferred tax account is as follows:

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2007  2006 
£m  £m 
At beginning of year  482  (14)
Income statement credit/(charge) 393  (4)
Equity 
Available for sale investments  13  4 
Cash flow hedges  (132) 128 
Share-based payments  (63) 24 
Other equity movements  (125) 48 
Acquisitions and disposals  33  264 
Exchange and other adjustments  7  32 
At end of year  608  482 

Deferred tax assets and liabilities are attributable to the following items:

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2007  2006 
£m  £m 
Deferred tax liabilities 
Accelerated tax depreciation  803  705 
Available for sale investments  101  116 
Cash flow hedges  51  – 
Other  771  702 
Deferred tax liabilities  1,726  1,523 
Deferred tax assets 
Pensions and other retirement benefits  491  622 
Allowance for impairment on loans  108  69 
Other provisions  377  436 
Cash flow hedges  44  91 
Tax losses carried forward  215  1 
Share-based payments  428  380 
Other  671  406 
Deferred tax assets  2,334  2,005 
Net deferred tax asset  608  482 
Disclosed as deferred tax liabilities  855  282 
Disclosed as deferred tax assets  1,463  764 
Net deferred tax asset  608  482 

19 Current and deferred tax (continued)

Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to set off and the balances relate to income tax payable to the same taxation authority on either the same taxable entity or different taxable entities within the same tax group where there is the intention and ability to settle on a net basis or realise the assets and liabilities simultaneously.

The amount of deferred tax liability expected to be settled after more than 12 months is £1,468m (2006: £1,046m).

The amount of deferred tax asset expected to be recovered after more than 12 months is £1,950m (2006: £1,582m).

The deferred tax assets balance includes £450m (2006: £106m) which is the excess deferred tax assets over deferred tax liabilities in entities which have suffered a loss in either the current or prior year. This is based on management assessment that it is probable that the relevant entities will have taxable profits against which the temporary differences can be utilised.

The deferred tax (credit)/charge in the income statement comprises the following temporary differences:

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2007  2006 
£m  £m 
Accelerated tax depreciation  118  120 
Pensions and other retirement benefits  96  (24)
Allowance for impairment on loans  (28) (30)
Other provisions  (165) (105)
Tax losses carry forward  (214) 25 
Available for sale investments  (1) 8 
Cash flow hedges  –  (14)
Share-based payments  (100) (77)
Other  (99) 101 
Total  (393) 4 

Deferred tax assets have not been recognised in respect of the following items:

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2007  2006 
£m  £m 
Deductible temporary differences (gross) 247  395 
Unused tax losses (gross) 1,683  190 
Unused tax credits  126  98 

The following tax losses expire: £9m in 2008 to 2011, £9m in 2011, £9m in 2012 and £1,201m in 2027. The other tax losses, tax credits and temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits. The unused tax losses include amounts relating to non-UK branches of Barclays Bank PLC where the future tax benefit might be restricted to the amount in excess of the UK rate.

The amount of temporary differences associated with investments in subsidiaries, branches, associates and joint ventures for which deferred tax liabilities have not been recognised is £5,722m (2006: £3,387m).

The tax charge for the period was based on a UK corporation tax rate of 30% (2006: 30%). The effective rate of tax for 2007, based on profit before tax, was 28% (2006: 27.2%). The effective tax rate differed from 30% as it took account of the different tax rate applied to profits earned outside the UK, non-taxable gains and income and adjustments to prior year tax provisions. The forthcoming change in the UK rate of corporation tax from 30% to 28% on 1st April 2008 led to an additional tax charge in 2007 as a result of its effect on the Group’s net deferred tax asset.

Notes to the accounts

For the year ended 31st December 2007


20 Investment in associates and joint ventures

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Share of net assets 
Associates Joint ventures Total
2007  2006  2007  2006  2007  2006 
£m  £m  £m  £m  £m  £m 
At beginning of year  74  427  154  119  228  546 
Share of results before tax  35  63  10  (6) 45  57 
Share of tax  (2) (10) (1) (1) (3) (11)
Share of post-tax results  33  53  9  (7) 42  46 
Dividends paid  –  (17) –  –  –  (17)
New investments  7  2  8  7  15  9 
Acquisitions  56  51  150  102  206  153 
Disposals  (47) (404) (72) (72) (119) (476)
Exchange and other adjustments  (33) (38) 38  5  5  (33)
At end of year  90  74  287  154  377  228 

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Share of net assets 
Associates Joint ventures Total
2007  2006  2007  2006  2007  2006 
£m  £m  £m  £m  £m  £m 
Cost 
At beginning of year  1  122  40  83  41  205 
Acquisitions  –  –  –  –  –  – 
Disposals  (1) (121) (16) –  (17) (121)
Transfer  –  –  3  (43) 3