Virgin Media 2007 Annual Report Download - page 187

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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Income Taxes (Continued)
A valuation allowance is recorded to reduce the deferred tax asset to an amount that is more
likely than not to be realized. To the extent that the portion of the valuation allowance that existed at
January 10, 2003 is reduced, the benefit would reduce excess reorganization value, then reduce other
intangible assets existing at that date, then be credited to paid in capital. The majority of the valuation
allowance relates to tax attributes that existed at January 10, 2003.
At December 31, 2007 we have U.K. net operating loss carryforwards of £3.1 billion that have no
expiration date. Pursuant to U.K. law, these losses are only available to offset income of the separate
entity that generated the loss. A portion of the U.K. net operating loss carryforwards relates to dual
resident companies, of which the U.S. net operating loss carryforward amount is £1.1 billion. U.S. tax
rules will limit our ability to utilize the U.S. losses. We also have U.K. capital loss carryforwards of
£12.1 billion that have no expiration date. However, we do not expect to realize any significant benefit
from these capital losses, which can only be used to the extent we generate U.K. taxable capital gain
income in the future from assets held by former NTL companies.
At December 31, 2007, we had fixed assets on which future U.K. tax deductions can be claimed of
£12.7 billion. With effect from April 1, 2008 the maximum amount that can be claimed in any one year
is 20% of the remaining balance, after additions, disposals and prior claims (previously 25%).
The reconciliation of income taxes computed at U.K. statutory rates to income tax expense
(benefit) is as follows (in millions):
Year ended December 31,
2007 2006 2005
Benefit at U.K. statutory rate (30%) ............................ £(140.0) £ (103.0) £ (69.6)
Add:
Permanent book-tax differences ............................... 6.3 6.4 7.6
Foreign losses with no benefit ................................ 134.3 94.8 62.0
£ 0.6 £ (1.8) £
Effective January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes—an interpretation of FASB Statement 109, or FIN 48. FIN 48 prescribes a comprehensive
model for recognizing, measuring, presenting and disclosing in the financial statements tax positions
taken or expected to be taken on a tax return, including a decision whether to file or not to file in a
particular jurisdiction. The adoption did not result in a cumulative effect adjustment and did not have a
material effect on our consolidated financial statements.
F-101