Holiday Inn 2013 Annual Report Download - page 175

Taxation
This section provides a summary of material US federal income tax
and UK tax consequences to the US holders, described below, of
owning and disposing of ordinary shares or ADSs of the Company.
This section addresses only the tax position of a US holder who holds
ordinary shares or ADSs as capital assets. This section does not,
however, discuss the provisions of the Internal Revenue Code of 1986,
as amended (IR Code), known as the Medicare Contribution tax, or the
tax consequences to holders subject to other special rules, such as:
• certain financial institutions;
• insurance companies;
• dealers and traders in securities who use a mark-to-market
method of tax accounting;
• persons holding ordinary shares or ADSs as part of a straddle,
conversion transaction integrated transaction or wash sale or
persons entering into a constructive sale with respect to the
ordinary shares or ADSs;
• persons whose functional currency for US federal income tax
purposes is not the US dollar;
• partnerships or other entities classified as partnerships for US
federal income tax purposes;
• persons liable for the alternative minimum tax;
• tax-exempt organisations;
• persons who acquired the Company’s ADSs or ordinary shares
pursuant to the exercise of any employee stock option or
otherwise in connection with employment; or
• persons who, directly or indirectly, own 10 per cent or more of
the Company’s voting stock.
This section does not generally deal with the position of a US
holder who is resident in the UK for UK tax purposes or who is
subject to UK taxation on capital gains or income by virtue of
carrying on a trade, profession or vocation in the UK through
a branch, agency or permanent establishment to which such
ADSs or ordinary shares are attributable (‘trading in the UK’).
As used herein, a ‘US holder’ is a person who, for US federal income
tax purposes, is a beneficial owner of ordinary shares or ADSs and
is: (i) a citizen or individual resident of the US; (ii) a corporation,
or other entity taxable as a corporation, created or organised in
or under the laws of the US or any political subdivision thereof;
(iii) an estate whose income is subject to US federal income tax
regardless of its source; or (iv) a trust if a US court can exercise
primary supervision over the trust’s administration and one or
more US persons are authorised to control all substantial decisions
of the trust.
This section is based on the IR Code, its legislative history, existing
and proposed regulations, published rulings and court decisions,
and on UK tax laws and the published practice of HM Revenue and
Customs (HMRC), all as of the date hereof. These laws, and that
practice, are subject to change, possibly on a retroactive basis.
This section is further based in part upon the representations of
the ADR Depositary and assumes that each obligation in the
deposit agreement and any related agreement will be performed
in accordance with its terms. For US federal income tax purposes,
an owner of ADRs evidencing ADSs will generally be treated as the
owner of the underlying shares represented by those ADSs. For UK
tax purposes, in practice, HMRC will also regard holders of ADSs
as the beneficial owners of the ordinary shares represented
by those ADSs (although case law has cast some doubt on this).
The discussion below assumes that HMRC’s position is followed.
Generally, exchanges of ordinary shares for ADSs, and ADSs for
ordinary shares, will not be subject to US federal income tax or
UK taxation on capital gains, although UK stamp duty reserve tax
(SDRT) may arise as described below.
The US Treasury has expressed concerns that parties to whom
ADRs are pre-released may be taking actions that are inconsistent
with the claiming of foreign tax creditsby US holders of ADSs.
Such actions would also be inconsistent with the claiming of the
preferential rates of tax, described below, for qualified dividend
income. Accordingly, the availability of the preferential rates of tax
for qualified dividend income described below could be affected by
actions taken by parties to whom the ADRs are pre-released.
The following discussion assumes that the Company is not, and
will not become, a passive foreign investment company (PFIC),
as described below.
Investors should consult their own tax advisors regarding
the US federal, state and local, the UK and other tax
consequences of owning and disposing of shares or ADSs
in their particular circumstances.
Taxation of dividends
UK taxation
Under current UK tax law, the Company will not be required to
withhold tax at source from dividend payments it makes.
A US holder who is not resident for UK tax purposes in the UK
and who is not trading in the UK will generally not be liable for
UK taxation on dividends received in respect of the ADSs or
ordinaryshares.
US federal income taxation
A US holder is subject to US federal income taxation on the gross
amount of any dividend paid by the Company out of its current or
accumulated earnings and profits (as determined for US federal
income tax purposes). Distributions in excess of the Company’s
current and accumulated earnings and profits, as determined
for US federal income tax purposes, will be treated as a return of
capital to the extent of the US holder’s basis in the shares or ADSs
and thereafter as capital gain. Because the Company has not
historically maintained, and does not currently maintain, books in
accordance with US tax principles, the Company does not expect
to be in a position to determine whether any distribution will be in
excess of the Company’s current and accumulated earnings and
profits as computed for US federal income tax purposes. As a
result, the Company expects that amounts distributed will be
reported to the Internal Revenue Service (IRS) as dividends.
Subject to applicable limitations and the discussion above
regarding concerns expressed by the US Treasury, dividends
paid to certain non-corporate US holders will be taxable at the
preferential rates applicable to long-term capital gain if the
dividends constitute qualified dividend income. The Company
expects that dividends paid by the Company with respect to the
ADSs will constitute qualified dividend income. US holders should
consult their own tax advisors to determine whether they are
subject to any special rules that limit their ability to be taxed at
these preferential rates.
Dividends must be included in income when the US holder, in the
case of shares, or the ADR Depositary, in the case of ADSs, actually
or constructively receives the dividend, and will not be eligible
for the dividends-received deduction generally allowed to US
corporations in respect of dividends received from other US
corporations. For foreign tax credit limitation purposes,
dividends will generally be income from sources outside the US.
Additional Information 173
OVERVIEW STRATEGIC REPORT GOVERNANCE
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Shareholder information