Virgin Media 2008 Annual Report Download - page 142

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 14—Income Taxes (Continued)
£2.0 million (2007 £2.2 million). Following the adoption of FAS 141(R) effective January 1, 2009, any
future benefit will be recognized as a reduction of income tax expense.
We emerged from Chapter 11 bankruptcy on January 10, 2003. The reorganization caused an
ownership change pursuant to Internal Revenue Service Code Section 382. As discussed in note 4,
acquisitions took place in 2006 that affected our share ownership. We consider that these changes
caused an ownership change pursuant to Section 382 during 2006. These ownership changes will not
restrict our ability to utilize U.S. net operating loss carryforwards at Virgin Media Inc. in future
periods.
At December 31, 2008, we had net operating loss carryforwards for U.S. federal income tax
purposes of £331 million that expire between 2018 and 2027. We have U.K. net operating loss
carryforwards of £3.5 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 carryforward relates to dual resident companies, of which the U.S. net operating loss
carryforward amount is £1.6 billion that expire between 2010 and 2027. Section 382 may severely limit
our ability to utilize these losses for U.S. purposes. 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, 2008, we had fixed assets on which future U.K. tax deductions can be claimed of
£13.2 billion. The maximum amount that can be claimed in any one year is 20% of the remaining
balance, after additions, disposals and prior claims.
The reconciliation of income taxes computed at U.S. federal statutory rates to income tax (benefit)
expense is as follows (in millions):
Year ended December 31,
2008 2007 2006
Benefit at federal statutory rate (35%) ............. £(321.9) £(161.3) £(182.7)
Add:
Permanent book-tax differences .................. 139.0 19.7 31.1
Foreign losses with no benefit ................... 120.3 122.7 92.6
U.S. losses with no benefit ..................... — — 30.5
Difference between U.S. and foreign tax rates ....... 59.1 21.9 16.7
State and local income tax ...................... — (0.6) —
Foreign tax benefit offsetting OCI tax expense ....... (3.4) — —
Other ..................................... 0.1 0.1 —
Provision (benefit) for income taxes ............... £ (6.8) £ 2.5 £ (11.8)
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-48