5. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
1997 1996 1995
£M £M £M
UK corporation tax 97 146 125
Credit for overseas taxation (9) (16) (9)
Overseas taxation 135 61 75
Taxes on return of capital to shareholders 23 – –
246 191 191
Deferred taxation (10) 19 (6)
236 210 185
Reconciliation to the UK nominal tax rate:
Effective tax rate 37.7% 32.2% 33.2%
Effective tax rate before non-deductible goodwill amortisation 34.9% 29.9% 30.9%
UK nominal tax rate 31.5% 33.0% 33.0%
Taxes as shown in these financial statements 236 210 185
Corporation tax on pre-tax profit at UK nominal rate 197 215 184
Difference 39 (5) 1
The difference is principally due to:
Non-tax deductible amortisation of goodwill 16 16 14
Taxes on return of capital to shareholders 23 – –
Other differences – (21) (13)
39 (5) 1
The other differences are primarily due to overseas profits taxed at rates differing from those in the UK. Significantly
higher US profits subject to higher tax rates have largely eliminated the difference in 1997.