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14 Deferred income tax
| All figures in £ millions | 2006 | 2005 |
|---|---|---|
| Deferred tax assets | ||
| Deferred tax assets to be recovered after more than 12 months | 288 | 343 |
| Deferred tax assets to be recovered within 12 months | 129 | 42 |
| 417 | 385 | |
| Deferred tax liabilities | ||
| Deferred tax liabilities to be settled after more than 12 months | (245) | (204) |
| Deferred tax liabilities to be settled within 12 months | – | – |
| (245) | (204) | |
| Net deferred tax | 172 | 181 |
Deferred tax assets to be recovered within 12 months relate to the utilisation of losses in the US. Included within the losses to be utilised in 2007 are capital and operating losses of £93m which it is anticipated will be utilised on the sale of Pearson Government Solutions.
Deferred income tax assets and liabilities may be offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The Group has unrecognised deferred tax assets at 31 December 2006 in respect of UK losses of £35m and has not recognised a deferred tax asset amounting to £47m on the net pension deficit on UK plans on the basis that it is not sufficiently certain that suitable future profits will arise against which to offset the liability. None of these unrecognised deferred tax assets have expiry dates associated with them.
The recognition of the deferred tax assets is supported by management's forecasts of the future profitability of the relevant business units.
The movement on the net deferred income tax account is as follows:
| All figures in £ millions | Notes | 2006 | 2005 |
|---|---|---|---|
| At beginning of year | 181 | 220 | |
| Transition adjustment on adoption of IAS 39 | – | 5 | |
| Exchange differences | (16) | 21 | |
| Acquisition through business combination | 28 | (26) | (21) |
| Income statement release/(charge) | 8 | 19 | (47) |
| Tax benefit to equity | 14 | 3 | |
| At end of year | 172 | 181 |
The movement in deferred income tax assets and liabilities during the year is as follows:
| All figures in £ millions | Capital losses |
Trading losses |
Goodwill and intangibles |
Other | Total |
|---|---|---|---|---|---|
| Deferred income tax assets | |||||
| At 1 January 2005 | – | 150 | 37 | 172 | 359 |
| Transition adjustment on adoption of IAS 39 | – | – | – | 5 | 5 |
| Exchange differences | – | 16 | 4 | 18 | 38 |
| Acquisition through business combination | – | – | – | 1 | 1 |
| Transfer between current and deferred taxation | – | – | – | 23 | 23 |
| Income statement charge | – | (32) | (6) | (6) | (44) |
| Tax benefit to equity | – | – | – | 3 | 3 |
| At 31 December 2005 | – | 134 | 35 | 216 | 385 |
| Exchange differences | – | (17) | (4) | (21) | (42) |
| Income statement release/(charge) | 76 | 12 | (6) | (19) | 63 |
| Tax benefit to equity | – | – | – | 11 | 11 |
| At 31 December 2006 | 76 | 129 | 25 | 187 | 417 |
Other deferred tax assets include temporary differences on inventory, sales returns and other provisions.
| All figures in £ millions | Goodwill and intangibles |
Other | Total |
|---|---|---|---|
| Deferred income tax liabilities | |||
| At 1 January 2005 | (59) | (80) | (139) |
| Exchange differences | (8) | (9) | (17) |
| Acquisition through business combination | (24) | 2 | (22) |
| Transfer between current and deferred taxation | – | (23) | (23) |
| Income statement (charge)/release | (26) | 23 | (3) |
| At 31 December 2005 | (117) | (87) | (204) |
| Exchange differences | 15 | 11 | 26 |
| Acquisition through business combination | (20) | (6) | (26) |
| Income statement charge | (27) | (17) | (44) |
| Tax benefit to equity | – | 3 | 3 |
| At 31 December 2006 | (149) | (96) | (245) |
Other deferred tax liabilities include temporary differences in respect of depreciation and royalty advances.