HSBC 2012 Annual Report Download - page 524

HSBC HOLDINGS PLC
Shareholder Information (continued)
Taxation of shares and dividends
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Taxation of shares and dividends
Taxation – UK residents
The following is a summary, under current law, of
certain UK tax considerations that are likely to be
material to the ownership and disposition of
shares. The summary does not purport to be
a comprehensive description of all the tax
considerations that may be relevant to a holder of
shares. In particular, the summary deals principally
with shareholders who are resident solely in the UK
for UK tax purposes and only with holders who hold
the shares as investments and who are the beneficial
owners of the shares, and does not address the tax
treatment of certain classes of holders such as
dealers in securities. Holders and prospective
purchasers should consult their own advisers
regarding the tax consequences of an investment
in shares in light of their particular circumstances,
including the effect of any national, state or local
laws.
Taxation of dividends
Currently no tax is withheld from dividends paid by
HSBC Holdings. However, dividends are paid with
an associated tax credit which is available for set-off
by certain shareholders against any liability they
may have to UK income tax. Currently, the
associated tax credit is equivalent to 10% of the
combined cash dividend and tax credit, i.e. one-ninth
of the cash dividend.
For individual shareholders who are resident in the
UK for taxation purposes and liable to UK income
tax at the basic rate, no further UK income tax
liability arises on the receipt of a dividend from
HSBC Holdings. Individual shareholders who
are liable to UK income tax at the higher rate or
additional rate are taxed on the combined amount
of the dividend and the tax credit at the dividend
upper rate (currently 32.5%) and the dividend
additional rate (currently 42.5%), respectively. The
UK Government has announced that the dividend
additional rate will be reduced from 42.5% to 37.5%,
with effect on and after 6 April 2013. The tax credit
is available for set-off against the dividend upper
rate and the dividend additional rate liability.
Individual UK resident shareholders are not entitled
to any tax credit repayment.
Although non-UK resident shareholders are
generally not entitled to any repayment of the tax
credit in respect of any UK dividend received, some
such shareholders may be so entitled under the
provisions of a double taxation agreement between
their country of residence and the UK. However, in
most cases no amount of the tax credit is, in practice,
repayable.
Information on the taxation consequences of the
HSBC Holdings scrip dividends offered in lieu of the
2011 fourth interim dividend and the first, second
and third interim dividends for 2012 was set out in
the Secretary’s letters to shareholders of 27 March,
29 May, 29 August and 7 November 2012. In no
case, was the difference between the cash dividend
foregone and the market value of the scrip dividend
in excess of 15% of the market value. Accordingly,
the amount of the dividend income chargeable to
tax, and, the acquisition price of HSBC Holdings
US$0.50 ordinary shares (the ‘shares’) for UK
capital gains tax purposes, was the cash dividend
foregone.
Taxation of capital gains
The computation of the capital gains tax liability
arising on disposals of shares in HSBC Holdings
by shareholders subject to UK tax on capital gains
can be complex, partly depending on whether, for
example, the shares were purchased since April
1991, acquired in 1991 in exchange for shares in
The Hongkong and Shanghai Banking Corporation
Limited, or acquired subsequent to 1991 in exchange
for shares in other companies.
For capital gains tax purposes, the acquisition
cost for ordinary shares is adjusted to take account
of subsequent rights and capitalisation issues. Any
capital gain arising on a disposal by a UK company
may also be adjusted to take account of indexation
allowance. If in doubt, shareholders are
recommended to consult their professional advisers.
Stamp duty and stamp duty reserve tax
Transfers of shares by a written instrument of
transfer generally will be subject to UK stamp duty
at the rate of 0.5% of the consideration paid for the
transfer, and such stamp duty is generally payable
by the transferee.
An agreement to transfer shares, or any interest
therein, normally will give rise to a charge to stamp
duty reserve tax at the rate of 0.5% of the
consideration. However, provided an instrument
of transfer of the shares is executed pursuant to the
agreement and duly stamped before the date on
which the stamp duty reserve tax becomes payable,
under the current practice of UK HM Revenue and
Customs it will not be necessary to pay the stamp
duty reserve tax, nor to apply for such tax to be
cancelled. Stamp duty reserve tax is generally
payable by the transferee.