10 Taxation

Recognised in the Income Statement


2012
£000
2011
£000
Current UK tax expense:

Current year
Double taxation relief

Current tax on foreign income for the year 1,030 968
Adjustments for prior years (60) (146)

970 822
Total current tax 970 822
Deferred tax expense (note 16)

Origination and reversal of temporary differences 705 (114)
Adjustments for prior years (78) 171

627 57
Tax in income statement 1,597 879

Reconciliation of effective tax rate ("ETR") and tax expense


2012
£000
ETR
%
2011
£000
ETR
%
Profit for the period 3,162
1,643
Tax from continuing operations 1,597
879
Profit before tax 4,759
2,522
Tax using the UK corporation tax rate of 26%
(2011: 28%)
1,237 26 706 28
Tax suffered on dividends 102 2 118 5
Non-deductible expenses 307 7 109 4
IFRS 2 share option charge/(credit) 4 (224) (9)
Deferred tax assets not recognised 287 6 328 13
Different tax rates on overseas earnings (265) (6) (213) (8)
Adjustments in respect of prior years (138) (3) 32 1
Tax rate change 63 2 23 1
Total tax in income statement 1,597 34 879 35

The ETR was affected by disallowable tax costs in relation to the acquisition of PSEP, the surrender of onerous leases in the UK and the closure costs of one of our sites in the US (see note 2). Before these one-off tax disallowable costs, the normalised ETR would have been 27% (2011: 27%).

The 2012 Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014. A reduction in the rate from 26% to 25% (effective from 1 April 2012) was substantively enacted on 5 July 2011, and a further reduction to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012.

This will reduce the Company's future current tax charge accordingly. The deferred tax at 31 March 2012 has been calculated based on the rate of 24% substantively enacted at the balance sheet date.

It has not yet been possible to quantify the full anticipated effect of the announced further 2% rate reduction, although this will further reduce the Company's future current tax charge and reduce the Company's deferred tax accordingly.

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