Annual Report 2007

Taxation

The effective rate of tax for the period is 33.9% (2007: 20.7%). This increase, with the effective rate above the UK corporate tax rate, is attributable to losses made by Amlin Bermuda which receive no tax relief at Group level. Bermudian losses are principally the result of negative foreign exchange movements in the period.

We continue to believe that Amlin Bermuda is exempt from the Controlled Foreign Corporation tax provisions of the UK tax regime. Existing legislation has meant that the Group would pay tax to the UK tax authorities only when distributions were made back to its UK holding companies.

However, on 25 November 2008, the UK government announced in its Pre Budget Report that legislation will be enacted such that dividends paid to UK companies by foreign subsidiaries would be exempt from UK corporate tax. At 31 December 2008, this announcement was still to be signed into statute and therefore, consistent with previous years, we have continued to recognise a future tax charge by holding a deferred tax provision of £16.1 million (2007: £20.3 million) in expectation of distribution of Amlin Bermuda’s retained profits.

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