Notes to the Accounts

7. Taxation

	UK:
	Corporation tax at 31% (1997: 31.5%)	134	37
	Deferred taxation	(4)	11
	Double taxation relief	(1)	(1)
	Associates	8	5
	Overseas:
	Overseas tax	45	30
	Deferred taxation	1	2
	Associates	5	5
		188	89
	Tax rate reconciliation
	UK tax rate	31.0	31.5
	Effect of utilisation of tax losses in the US	(2.7)	(4.3)
	Other items	(0.3)	2.2
	Tax rate reflected in adjusted earnings	28.0	29.4
	Effect of profits/(losses) excluded from adjusted earnings	1.9	39.5
	Tax rate reflected in earnings	29.9	68.9

NOTE: The Group continues to have substantial tax losses available in the US which are not recognised in the accounts and more than offset both 1998 and 1997 US profits, so reducing the Group tax rate reflected in adjusted earnings. Relief has not been taken for the Simon & Schuster integration costs to the extent that they arose in the US, hence increasing the effective tax rate on earnings. This was largely offset by the fact that, as in 1997, the tax payable on profits on disposals benefited from the use of losses brought forward, indexation and from other differences between book and tax bases for the calculation of gains. 1997 was also affected by no relief being taken for the provision against the goodwill on the sale of Mindscape Inc.