BT 2009 Annual Report Download - page 159

ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
ADDITIONAL INFORMATION INFORMATION FOR SHAREHOLDERS
157BT GROUP PLC ANNUAL REPORT & FORM 20-F
ADDITIONAL INFORMATION
Taxation of capital gains
Unless a US Holder of ordinary shares or ADSs is resident in or ordinarily resident for United Kingdom tax purposes in the United Kingdom
or unless a US Holder of ordinary shares or ADSs carries on a trade, profession, or vocation in the United Kingdom through a branch,
agency, or in the case of a company, a permanent establishment in the UK, and the ordinary shares and/or ADSs have been used, held, or
acquired for the purposes of that trade, profession or vocation the holder should not be liable for UK tax on capital gains on a disposal of
ordinary shares and/or ADSs.
A US Holder who is an individual and who has ceased to be resident or ordinarily resident for tax purposes in the United Kingdom on or
after 17 March 1998 or who falls to be regarded as resident outside the United Kingdom for the purposes of any double tax treaty (Treaty
non-resident) on or after 16 March 2005 and continues to not be resident or ordinarily resident in the United Kingdom or continues to be
Treaty non-resident for a period of less than five years of assessment and who disposes of his ordinary shares or ADSs during that period
may also be liable on his return to the United Kingdom to United Kingdom tax on capital gains, subject to any available exemption or relief,
even though he is not resident or ordinarily resident in the United Kingdom or is Treaty non-resident at the time of disposal.
For US federal income tax purposes, a US Holder generally will recognise capital gain or loss on the sale, exchange or other disposition of
ordinary shares or ADSs in an amount equal to the difference between the US dollar value of the amount realised on the disposition and
the US Holder’s adjusted tax basis (determined in US dollars) in the ordinary shares or ADSs. Such gain or loss generally will be US source
gain or loss, and will be treated as long-term capital gain or loss if the ordinary shares have been held for more than one year at the time of
disposition. Long-term capital gains recognised by an individual US Holder generally are subject to US federal income tax at preferential
rates. The deductibility of capital losses is subject to significant limitations.
A US Holder’s tax basis in an ordinary share will generally be its US dollar cost. The US dollar cost of an ordinary share purchased with
foreign currency will generally be the US dollar value of the purchase price on the date of purchase, or the settlement date for the
purchase, in the case of ordinary shares traded on an established securities market, as defined in the applicable Treasury Regulations, that
are purchased by a cash basis US Holder (or an accrual basis US Holder that so elects). Such an election by an accrual basis US Holder must
be applied consistently from year to year and cannot be revoked without the consent of the IRS. The amount realised on a sale or other
disposition of ordinary shares for an amount in foreign currency will be the US dollar value of this amount on the date of sale or disposition.
On the settlement date, the US Holder will recognise US source foreign currency gain or loss (taxable as ordinary income or loss) equal to the
difference (if any) between the US dollar value of the amount received based on the exchange rates in effect on the date of sale or other
disposition and the settlement date. However, in the case of ordinary shares traded on an established securities market that are sold by a
cash basis US Holder (or an accrual basis US Holder that so elects), the amount realised will be based on the exchange rate in effect on the
settlement date for the sale, and no exchange gain or loss will be recognised at that time.
Passive foreign investment company status
A non-US corporation will be classified as a Passive Foreign Investment Company for US federal income tax purposes (a PFIC) for any
taxable year if at least 75% of its gross income consists of passive income or at least 50% of the average value of its assets consist of assets
that produce, or are held for the production of, passive income. BT currently believes that it did not qualify as a PFIC for the tax year ending
31 March 2009. If BT were to become a PFIC for any tax year, US Holders would suffer adverse tax consequences. These consequences may
include having gains realised on the disposition of ordinary shares or ADSs treated as ordinary income rather than capital gains and being
subject to punitive interest charges on certain dividends and on the proceeds of the sale or other disposition of the ordinary shares or
ADSs. Furthermore, dividends paid by BT would not be ‘qualified dividend income’ which may be eligible for reduced rates of taxation as
described above. US Holders should consult their own tax advisors regarding the potential application of the PFIC rules to BT.
US information reporting and backup withholding
Dividends paid on and proceeds received from the sale, exchange or other disposition of ordinary shares or ADSs may be subject to
information reporting to the IRS and backup withholding at a current rate of 28% (which rate may be subject to change). Certain exempt
recipients (such as corporations) are not subject to these information reporting requirements. Backup withholding will not apply, however,
to a US Holder who provides a correct taxpayer identification number or certificate of foreign status and makes any other required
certification or who is otherwise exempt. Persons that are United States persons for US federal income tax purposes who are required to
establish their exempt status generally must furnish IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Holders
that are not United States persons for US federal income tax purposes generally will not be subject to US information reporting or backup
withholding. However, such holders may be required to provide certification of non-US status in connection with payments received in the
United States or through certain US-related financial intermediaries.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s US federal
income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the
appropriate claim for refund with the IRS and furnishing any required information.
UK stamp duty
A transfer of or an agreement to transfer an ordinary share will generally be subject to UK stamp duty or UK stamp duty reserve tax (SDRT)
at 0.5% of the amount or value of any consideration provided rounded up (in the case of stamp duty) to the nearest £5. SDRT is generally
the liability of the purchaser. It is customarily also the purchaser who pays UK stamp duty. A transfer of an ordinary share to, or to a
nominee for, a person whose business is or includes the provision of clearance services or to, or to a nominee or agent of, a person whose
business is or includes issuing depositary receipts gives rise to a 1.5% charge to stamp duty or SDRT of either the amount of the
consideration provided or the value of the share issued rounded up (in the case of stamp duty) to the nearest £5. No UK stamp duty will be
payable on the transfer of an ADS (assuming it is not registered in the UK), provided that the transfer documents are executed and always
retained outside the UK.