Taxation of Dividends
Australian Residents
An individual shareowner, resident in Australia for tax purposes, will be assessable to Australian income tax on a dividend received from a UK resident company. The assessable amount will be the AUD equivalent of the GBP dividend, on the day it is paid or received.
An Australian tax resident non-individual shareowner (defined as a shareowner who is not a natural person and who owns less than 10% of the issued share capital of the Company) will be assessable to Australian income tax on a similar basis to an individual shareowner. If an Australian resident company owns at least 10% of a UK resident company, the dividend may be exempt.
If on receipt of the dividend the GBP amount is not immediately converted to AUD, the shareholder may be subject to Australian tax on any foreign exchange gain or loss that arises.
UK Residents
An individual shareowner resident in the UK is generally treated
for UK income tax purposes as having taxable income equal to the
sum of the dividend paid and the tax credit attaching to the
dividend. The tax credit is equal to one-ninth of the dividend and
may be credited against the shareowner's UK income tax
liability.
Shareowners who pay tax at the starting rate (10%), lower rate
(20%) or basic rate (22%) will have no further liability to
tax.
Non taxpayers will be unable to make a claim for the repayment of the notional tax credit.
The position of higher rate taxpayers is as follows (using a cash dividend of £90 as an example):
| £ | |
|---|---|
| Cash dividend | 90.00 |
| Tax credit | 10.00 |
| Income | 100.00 |
| Higher Rate Tax* | (32.50) |
| After-tax income | 67.50 |
* The higher tax rate itself is 40%, however a special tax rate of 32.5% applies to income from UK dividends. Tax payable under self assessment is £22.50 (made up of £32.50 less the tax credit of £10).
Where ordinary shares are held in Personal Equity Plans and Individual Savings Accounts, the tax credit on dividends received into such accounts before 6 April 2004 will generally be repayable, but after this date such tax credit will no longer be repayable.
US Residents
A US resident shareowner will be treated as receiving dividend income equal to the amount of the dividend. The UK does not impose withholding tax on dividends paid to US resident shareowners.
A dividend payable to a holder who is a US citizen or a US resident (as defined below) will generally be treated as foreign source dividend income for US federal income tax purposes. The amount of any cash distribution paid in pounds sterling will be the US dollar value of the pounds sterling payment on the date of receipt by the US holder (or, in the case of ADRs, by the Depositary), regardless of whether the payment is converted into US dollars. Gain or loss, if any, recognised on the sale or disposition of pounds sterling generally will be ordinary US source income or loss. Such dividend will not be eligible for the 70% dividends received deduction allowed to US corporations under Section 243 of the Code. Special rules apply for the purposes of determining the dividend paid and foreign tax credit available to a US corporation which, either alone or together with one or more associated corporations, controls, directly or indirectly, 10% or more of the voting stock of the Company. Subject to certain exceptions for positions that are hedged or held for less than 60 days, an individual holder of shares generally should be subject to US taxation at a maximum rate of 15% in respect of dividends received in 2005. The US Treasury and the Internal Revenue Service have announced that they intend to develop a certification procedure by which a foreign corporation may certify that it satisfies certain of the requirements for the rate of 15% in respect of dividends received before 2009 by individual shareholders of such foreign corporations.
As used herein, the term "US resident" includes an individual resident in the US for purposes of US tax, a US corporation and a foreign corporation or non-resident alien individual engaged in the conduct of a trade or business within the US with which a dividend or gain, as the case may be, on the ADRs or ordinary shares is effectively connected.
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