Virgin Media 2010 Annual Report Download - page 221

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES
COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13—Income Taxes (continued)
A valuation allowance is recorded to reduce the deferred tax assets to an amount that is more likely than not
to be realized. To the extent that a portion of the valuation allowance is reduced, the benefit will be recognized as
a reduction of income tax expense.
At December 31, 2010, we have U.K. net operating loss carryforwards of £2.6 billion that have no
expiration date. Pursuant to U.K. law, these losses are only available to offset income of the legal 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 £1.5 billion and expires between 2011 and 2028.
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 subsidiaries owned by the group prior to the merger with
Telewest.
At December 31, 2010, we had fixed assets on which future U.K. tax deductions can be claimed of £12.6
billion. The maximum amount that can be claimed in any one year is 20% of the remaining balance, after
additions, disposals and prior claims. This rate is expected to fall to 18% with effect from 1 April 2012.
The reconciliation of income taxes computed at U.S. federal statutory rates to income tax benefit
attributable to continuing operations is as follows (in millions):
Year ended December 31,
2010 2009 2008
Benefit at U.K. statutory rate (2010: 28%, 2009: 28% and 2008: 28.5% ) ......... £ 72.0 £ 95.0 £ 253.6
Add:
Permanent book-tax differences ...................................... (0.4) (9.5) (132.7)
Reduction in valuation allowance for US NOLS ......................... 79.8 — —
Foreign losses with no benefit ....................................... (65.0) (84.4) (114.4)
Foreign tax benefit offsetting OCI tax expense .......................... 41.5 — 3.4
Benefit for income taxes ................................................ £127.9 £ 1.1 £ 9.9
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in
millions):
2010 2009 2008
Balance, January 1 ...................................... £— £1.5 £1.1
Additions based on tax positions related to the current year . . — — —
Additions for tax provisions of prior years ................ — — 0.4
Reductions for tax provisions of prior years ............... — (1.5) —
Reductions for lapse of applicable statute of limitation ...... — — —
Settlements ........................................ — — —
Balance, December 31 ................................... £— £— £1.5
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