6. Taxation on profits on ordinary activities

The charge for taxation is based on the annual tax rate of 30.5% on profit before tax (2007: 31.0%).

Analysis of charge in the year

2008
£’000		 2007
£’000
UK income tax at 28.5% (2007: 30.0%) for year 19,636 22,518
Adjustments in respect of prior periods (364) (1,141)
Overseas income tax 24,073 23,866
43,345 45,243
   
Deferred tax expense  
Origination and reversal of temporary differences 946 (1,228)
Reduction in tax rate – (16)
(Benefit)/charge of tax losses recognised (1,574) 1,708
Deferred tax (benefit)/expense (628) 464
Total income tax expense in the income statement 42,717 45,707

Reconciliation of effective tax rate

2008
£’000		 % 2007
£’000		 %
Profit before taxation 140,056 147,441
Profit on ordinary activities before tax multiplied by the standard rate of corporation tax in the UK 39,916 28.5 44,232 30.0
Effects of:
Disallowable items and other permanent timing differences 893 0.5 715 0.5
Unrelieved overseas losses 716 0.5 416 0.3
Utilisation of losses not previously recognised (146) (0.1) – –
Recognition of further losses not previously recognised 730 0.5 – –
Higher tax rates on overseas earnings 972 0.8 1,485 1.0
Adjustment to tax charge in respect of prior periods (364) (0.2) (1,141) (0.8)
Tax expense and effective rate for the year 42,717 30.5 45,707 31.0
Tax recognised directly in equity 2008
£’000		 2007
£’000
Relating to equity settled transactions (611) 833