BT 2011 Annual Report Download - page 174

171BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION INFORMATION FOR SHAREHOLDERS
Certain US Holders (including individuals) are eligible for reduced rates of US federal income tax (currently at a maximum rate of 15%) in
respect of ‘qualified dividend income’ received in taxable years beginning before 1 January 2011. For this purpose, qualified dividend
income generally includes dividends paid by a non-US corporation if, among other things, the US Holders meet certain minimum holding
periods and the non-US corporation satisfies certain requirements, including that either (i) the shares or ADSs with respect to which the
dividend has been paid are readily tradeable on an established securities market in the US, or (ii) the non-US corporation is eligible for the
benefits of a comprehensive US income tax treaty (such as the Convention) which provides for the exchange of information. BT currently
believes that dividends paid with respect to its ordinary shares and ADSs should constitute qualified dividend income for US federal income
tax purposes. Each individual US Holder of ordinary shares or ADSs is urged to consult his own tax advisor regarding the availability to him of
the reduced dividend tax rate in light of his own particular situation and regarding the computations of his foreign tax credit limitation with
respect to any qualified dividend income paid by BT to him, as applicable.
Taxation of capital gains
Unless a US Holder of ordinary shares or ADSs is resident in or ordinarily resident for UK tax purposes in the UK or unless a US Holder of
ordinary shares or ADSs carries on a trade, profession, or vocation in the UK 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 UK on or after 17 March
1998 or who falls to be regarded as resident outside the UK 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 UK 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 UK to UK
tax on capital gains, subject to any available exemption or relief, even though he is not resident or ordinarily resident in the UK 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 2010. 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 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 Identification Number and Certification). 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 certification of non-US status in connection with payments received in the US 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.
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