8. Tax on profit on ordinary activities | |
| 2004 £m |
2003 £m |
|
|---|---|---|
| (a) Analysis of charge for the year | ||
| Current tax: | ||
| UK Corporation tax on profits of the year | 139 | 71 |
| Double taxation relief | (8) | (7) |
| Adjustments in respect of prior years | 4 | (2) |
| 135 | 62 | |
| Overseas tax | 52 | 46 |
| Group share of tax on profits of joint venture | 4 | 3 |
| Group share of tax on profits of associated undertakings | 2 | 2 |
| Total current tax charge for the year | 193 | 113 |
| Deferred tax: | ||
| Origination and reversal of timing differences | 24 | 46 |
| Increase in discount | (17) | (19) |
| Adjustments in respect of prior years | (8) | 1 |
| Tax on profit on ordinary activities | 192 | 141 |
| (b) Factors affecting the tax charge for the year The tax charge for the year is lower than the standard rate of Corporation tax in the UK (30%). | ||
| The differences are explained below: | ||
| Profit on ordinary activities before taxation | 692 | 409 |
| Profit on ordinary activities before taxation multiplied by the standard rate of Corporation tax in the UK of 30% | 208 | 123 |
| Effects of: | ||
| Adjustments to tax charge in respect of prior years | 4 | (2) |
| Expenses not deductible for tax purposes | 6 | 15 |
| Goodwill amortisation not deductible for tax purposes | 54 | 48 |
| Tax relief in respect of US goodwill written off to reserves | (14) | (18) |
| Differences in effective tax rates on overseas earnings | (23) | (13) |
| Other permanent differences | (12) | (27) |
| Disposal of businesses | (23) | 15 |
| Other timing differences | (7) | (28) |
| Current tax charge for the year | 193 | 113 |
(c) Factors that may affect future tax charges
| In the foreseeable future, the Group’s tax charge will continue to be influenced by the profile of profits earned in the different countries in which the business operates. Changes in long term interest rates would affect the discount applied to deferred taxation. |
(d) Tax effect of exceptional items
There is no taxation in respect of the exceptional items for the year ended 31 March 2004. In the year ended 31 March 2003, tax relief of £7m was recognised on the cost of employee share schemes in connection with the disposal of shares in Burberry.