Virgin Media 2012 Annual Report Download - page 180

F-109
At December 31, 2012, we had fixed assets on which future U.K. tax deductions can be claimed of £12.7 billion. The
maximum amount that can be claimed in any one year is 18% of the remaining balance, after additions, disposals and
prior claims.
At each period end, it is necessary for us to make certain estimates and assumptions to compute the provision for
income taxes including, but not limited to the expected operating income (or loss) for the year, projections of the
proportion of income (or loss) earned and taxed in the U.K. and the extent to which this income (or loss) may also be
taxed in the United States, permanent and temporary differences, the likelihood of deferred tax assets being recovered
and the outcome of contingent tax risks. In the normal course of business, our tax returns are subject to examination
by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing
authorities for uncertain tax positions taken in respect to matters such as business acquisitions and disposals and
certain financing transactions including intercompany transactions, amongst others. We accrue a liability when we
believe an assessment may be probable and the amount is estimable. In accordance with generally accepted accounting
principles, the impact of revisions to these estimates is recorded as income tax expense or benefit in the period in
which they become known. Accordingly, the estimates used to compute the provision for income taxes may change
as new events occur, as more experience is acquired, as additional information is obtained and as our tax environment
changes.
Note 10—Related Party Transactions
Virgin Media Inc. and its consolidated subsidiaries
We are wholly owned subsidiaries of Virgin Media Inc. We charge Virgin Media Inc. and certain of its group
companies for operating costs and selling, general and administrative expenses incurred by us on their behalf. The
following information summarizes our significant related party transactions with Virgin Media Inc. and its group
companies (in millions):
Year ended December 31,
2012 2011 2010
Operating costs £ 43.0 £ 44.6 £ 39.8
Selling, general and administrative expenses 53.9 35.4 44.8
£ 96.9 £ 80.0 £ 84.6
The above recharges are recorded in operating costs and selling, general and administrative expenses and offset the
respective costs incurred.
Virgin Enterprises Limited
We have identified Virgin Enterprises Limited as a related party to us. Virgin Entertainment Investment Holdings Limited
became a holder of the common stock of Virgin Media Inc. as a result of its acquisition of Virgin Mobile on July 4, 2006.
As of December 31, 2012, Virgin Entertainment Investment Holdings Limited beneficially owned 2.5% of the common
stock of Virgin Media Inc. (based on SEC filings). Virgin Enterprises Limited is a wholly owned subsidiary of Virgin
Entertainment Investment Holdings Limited. In addition, Gordon McCallum is a member of the Board of Directors of
Virgin Media Inc. and is a Director of Virgin Enterprises Limited.
We own and have the right to use registered trademarks, including the exclusive right to use the “Virgin” name and
logo in connection with our corporate activities and in connection with the activities of our consumer business under
license from Virgin Enterprises Limited. This license with Virgin Enterprises Limited is for a 30-year term and exclusive
to us within the U.K. and Ireland. The license entitles us to use the “Virgin” name for the TV, broadband internet,
telephone and mobile phone services we provide to our residential customers, as well as the acquisition and branding
of sports, movies and other premium television content and the sale of certain communications equipment, such as
set top boxes and cable modems. Our license agreement provides for an annual royalty of 0.25% of certain consumer
revenues, subject to a minimum annual royalty of £8.5 million. As part of the agreement, we have the right to adopt,
Table of Contents
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES
COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 9 - Income Taxes (continued)