Notes to the consolidated financial statements

• « 37 Retirement benefit obligations
• 38 Deferred tax
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38 Deferred tax

The movement in the net deferred tax balance is as follows:

	2008 £m		2007 £m
Liability at 1 January	948		1,416
Exchange and other adjustments	4		–
Disposals	(98)		(389)
Income statement (credit) charge:
Due to change in UK corporation tax rate	–		(110)
Other	(773)		21
	(773)		(89)
Amount charged (credited) to equity:
Available-for-sale financial assets (note 43)	(566)		(1)
Net investment hedge (note 43)	(358)		–
Cash flow hedges (note 43)	(5)		(6)
Share based compensation	15		17
	(914)		10
(Asset) liability at 31 December	(833)		948

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

	2008 £m		2007 £m
Accelerated capital allowances	(318)		(32)
Pensions and other post-retirement benefits	104		134
Investment reserve	32		(30)
Allowances for impairment losses	(2)		42
Unrealised gains	(297)		(91)
Tax on value of in-force business	(193)		(108)
Other temporary differences	(99)		(4)
	(773)		(89)

Deferred tax assets and liabilities are comprised as follows:

	2008 £m		2007 £m
Deferred tax assets:
Pensions and other post-retirement benefits	(496)		(600)
Allowances for impairment losses	(103)		(101)
Other provisions	(51)		(15)
Derivatives	(114)		(178)
Available-for-sale asset revaluation	(567)		(1)
Tax losses carried forward	(856)		(409)
Other temporary differences	(121)		(168)
	(2,308)		(1,472)
	2008 £m		2007 £m
Deferred tax liabilities:
Accelerated capital allowances	561		979
Investment reserve	151		119
Unrealised gains	45		342
Tax on value of in-force business	459		652
Other temporary differences	259		328
	1,475		2,420

Deferred tax assets

Deferred tax assets are recognised for tax losses and foreign tax credit carry forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. Scottish Widows plc has recognised a deferred tax asset of £388 million and other Group companies have recognised deferred tax assets totalling £468 million in relation to tax losses carried forward. For all of these losses, after reviewing medium term profit forecasts, the Group considers that there will be sufficient profits in the future against which these losses will be offset.

Deferred tax assets of £252 million (2007: £33 million) have not been recognised in respect of capital losses carried forward as there are no predicted future capital profits. Capital losses can be carried forward indefinitely.

In addition, deferred tax assets have not been recognised in respect of Eligible Unrelieved Foreign Tax (EUFT) and other foreign tax credits carried forward as at 31 December 2008 of £60 million (2007: £104 million), as there are no predicted future taxable profits against which the unrelieved foreign tax credits can be utilised. EUFT can be carried forward indefinitely.

Deferred tax liabilities

Deferred tax liabilities have not been recognised for tax that may be payable if earnings of certain subsidiaries were remitted to the UK.
Such amounts are either reinvested for the foreseeable future or can be remitted free of tax. Unremitted earnings totalled £1,196 million
(2007: £928 million).

Future transfers from Scottish Widows plc’s long-term business funds to its Shareholder Fund will be subject to a shareholder tax charge. Under IAS 12, no provision is required to be made to the extent that the timing of such transfers is under Scottish Widows plc's control. Accordingly, deferred tax liabilities of £90 million (2007: £90 million) have not been recognised.