Notes to the Accounts
7. Taxation
| 1997 | 1996 | |
| All figures in £ million | ||
| Taxation on profit on ordinary activities: | ||
| United Kingdom: | ||
| Corporation tax at 31.5% (1996: 33%) | 37.2 | 46.8 |
| Deferred taxation | 10.9 | (5.5) |
| BskyB | (0.2) | (8.8) |
| Double taxation relief | (0.5) | (2.2) |
| Partnerships and associated undertakings | 4.7 | 10.2 |
| Tax on franked investment income | - | 0.2 |
| Overseas: | ||
| Overseas tax | 29.4 | 25.3 |
| Deferred taxation | 2.0 | 41.2 |
| Partnerships and associated undertakings | 5.1 | 1.4 |
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| 88.6 | 108.6 | |
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| 1997 | 1996 | |
| All figures in percentages | ||
| Tax rate reconciliation | ||
| United Kingdom tax rate | 31.5 | 33.0 |
| Effect of BSkyB/ BSBH income | - | (3.5) |
| Effect of utilisationof tax losses in the USA | (4.3) | - |
| Other items | 2.2 | (0.7) |
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| Tax rate reflected in adjusted earnings | 29.4 | 28.8 |
| Effect of profits/ (losses) excluding from adjusted earnings | 39.5 | 1.6 |
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| Tax rate reflected in earnings | 68.9 | 30.4 |
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Note: The 1997 tax rate has been affected by two significant factors:
A) The Group has substantial tax losses in the USA which have not been recognised in the accounts and more than offset 1997 profits, so reducing the Group tax rate reflected in adjusted earnings.
B) There is no tax payable on the profit arising on the disposal of TVB and the tax payable on the disposal of Flextech plc is reduced by capital losses brought forward. The provision against goodwill on the sale of Mindscape Inc. has had no impact on current year tax.
The 1996 tax rate was affected by three significant factors:
A) The rate reflected in adjusted earnings was reduced by £8.8m of consortium relief recognised in the profit and loss account following renegotiation with the other partners in BSBH.
B) There was no tax payable on the profit of £231.3m arising on the sale of Westminster Press.
C) The Group had tax losses, arising in the USA, which had not been utilised or recognised in 1996 but were available to carry forward against taxable profits in future years. Accordingly the Group decided not to recognise tax relief on the £100m charge for improper accounting at Penguin USA and wrote off to profit deferred tax assets totalling £36.6m.
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