BT 2014 Annual Report Download - page 204

201
Additional information
Additional information
amount received based on the exchange rates in eect 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 eect
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 classied 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 ended 31 March 2014. If BT
were to become a PFIC for any tax year, US Holders would suer 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 qualied 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 identication number or
certicate of foreign status and makes any other required certication
or who is otherwise exempt. Persons that are US 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
Identication Number and Certication). Holders that are not US 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 certication of non-US status in connection
with payments received in the US or through certain US-related
nancial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 ling
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.
Transfers of ordinary shares into CREST will generally not be subject to
stamp duty or SDRT unless such a transfer is made for a consideration
in money or money’s worth, in which case a liability to SDRT will arise,
usually at the rate of 0.5% of the value of the consideration. Paperless
transfers of ordinary shares within CREST are generally liable to SDRT at
the rate of 0.5% of the value of the consideration. CREST is obliged to
collect SDRT from the purchaser of the shares on relevant transactions
settled within the system.
The above statements are intended as a general guide to the current
position. Certain categories of person (including recognised market
makers, brokers and dealers) may not be liable to stamp duty or SDRT or
may, although not liable for the tax, be required to notify and account
for it under the Stamp Duty Reserve Tax Regulations 1986.
UK inheritance and gift taxes in connection with ordinary
shares and/or ADSs
The rules and scope of domicile are complex and action should not be
taken without advice specic to the individual’s circumstances.
Alifetime gift or a transfer on death of ordinary shares and/or ADSs
by an individual holder, who is US domiciled (for the purposes of the
UK/US Estate and Gift Tax Convention) and who is not a UK national
(as dened in the Convention) will not generally be subject to UK
inheritance tax if the gift is subject to US federal gift or US estate tax
unless the tax is not paid (otherwise than as a result of a specic
exemption, deduction, exclusion, credit or allowance).
Further note on certain activities
During 2013/14, certain of the group’s non-US subsidiaries or other
non-US entities conducted limited activities in, or with persons from,
certain countries identied by the US Department of State as State
Sponsors of Terrorism or otherwise subject to US sanctions. These
activities, which generally relate to the provision of communications
services to embassies and diplomatic missions of US-allied governments,
other CPs, news organisations, multinational corporations and other
customers that require global communications connectivity, are
insignicant to the group’s nancial condition and results of operations.
Under Section 219 of the Iran Threat Reduction and Syria Human Rights
Act of 2012, which added Section 13 (r) to the Securities Exchange Act
of 1934, we are required to disclose whether BT or any of its aliates
knowingly engaged in certain activities, transactions or dealings
relating to Iran or certain designated individuals or entities. Disclosure
is required even when the activities were conducted outside the US by
non-US entities and even when they were conducted in compliance with
applicable law. Our disclosures for 2013/14, which remain unchanged
from 2012/13, are below.
HM Treasury approval was granted on 31October 2012 for
authorisation to receive €75,000 from Telecommunication
Infrastructure Company (TIC), in Iran. The payment was for receiving
incoming UK telecommunications tari from Iran (BT is paid on a per
minute basis for terminating calls).
Between July 2007 and October 2012 a BT subsidiary, Communications
Global Network Services (CGNS), acted as billing agent for a consortium
of telecommunications companies, of which CGNS was a member,
in respect of a subsea cable contract. As billing agent, CGNS invoiced
telecommunications companies worldwide, collecting funds and
dispersing these to the consortium members and, during that time,
received indirect payments on behalf of TIC.
BT entered into a Framework Agreement with Rafsanjan Industrial
Complex (RIC) for business consultancy services in May 2010 and
provided an initial consultancy engagement under phase 1 of the
agreement. In February 2011, phase 2 was agreed with RIC however BT
stopped work in December 2011 due to the geopolitical situation. RIC
made an advance payment to BT of €384,120 to carry out the phase 2
work. We continue to explore whether the amount can be refunded.