Barclays 2003 Annual Report Download - page 226

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Shareholder Information
Taxation of UK holders
Taxation of dividends
In accordance with UK law, Barclays PLC and the Bank pay dividends
on ordinary shares and preference shares without any deduction or
withholding tax in respect of any taxes imposed by the UK government
or any UK taxing authority.
If the shareholder is a UK resident individual liable to income tax only
at the basic rate or the lower rate, then there will be no further tax
liability in respect of the dividend received. If, however, the individual
shareholder is subject to income tax at the higher rate (currently 40%),
there will be a further liability to tax. Higher rate taxpayers are taxable
on dividend income at a special rate of (currently 32.5%) against which
can be offset a tax credit of one-ninth of the dividend paid. Tax credits
are no longer repayable to shareholders with no tax liability.
Taxation of shares under the Dividend Reinvestment Plan
Where a shareholder elects to purchase shares using their cash dividend,
the individual will be liable for income tax on dividends reinvested in the
Plan on the same basis as if they had received the cash and arranged
the investment themselves. They should accordingly include the
dividend received in their annual tax return in the normal way. The tax
consequences for a UK individual are the same as described in ‘Taxation
of dividends’ above.
Taxation of capital gains
Where shares are disposed of by open market sale, a capital gain may
result if the disposal proceeds exceed the sum of the base cost of the
shares sold and any other allowable deductions such as share dealing
costs, indexation relief (up to 5th April 1998) and taper relief (generally
on shares held at 16th March 1998 and subsequent acquisitions). To
arrive at the total base cost of any Barclays PLC shares held, the amount
subscribed for rights taken up in 1985 and 1988 must be added to the
cost of all other shares held. For this purpose, current legislation permits
the market valuation at 31st March 1982 to be substituted for the
original cost of shares purchased before that date.
The calculations required to compute chargeable capital gains,
particularly taper and indexation reliefs, may be complex. Capital gains
may also arise from the gifting of shares to connected parties such as
relatives (although not spouses) and family trusts. Shareholders are
advised to consult their personal financial adviser if further information
regarding a possible tax liability in respect of their holdings of
Barclays PLC shares is required.
Stamp duty
On the purchase of shares, stamp duty or stamp duty reserve tax at the
rate of 0.5% is normally payable on the purchase price of the shares.
Inheritance tax
An individual may be liable to inheritance tax on the transfer of ordinary
shares or preference shares. Where an individual is liable, inheritance tax
may be charged on the amount by which the value of his or her estate
is reduced as a result of any transfer by way of gift or other gratuitous
transaction made by them or treated as made by them.
Taxation of US holders
Taxation of dividends
A US holder is subject to US federal income taxation on the gross
amount of any dividend paid by Barclays out of its current or
accumulated earnings and profits (as determined for US federal income
tax purposes). Dividends paid to a non-corporate US holder in taxable
years beginning after 31st December 2002 and before 1st January 2009
that constitute qualified dividend income will be taxable to the holder
at a maximum tax rate of 15%, provided that the holder has a holding
period of the shares or ADSs of more than 60 days during the 120-day
period beginning 60 days before the ex-dividend date and meets other
holding period requirements. On 19th February 2004, the IRS
announced that it will permit taxpayers to apply a proposed legislative
change to the holding period requirement described in the preceding
sentence as if such change were already effective. This legislative
‘technical correction’ would change the minimum required holding
period, retroactive to 1st January 2003, to more than 60 days during
the 121-day period beginning 60 days before the ex-dividend date.
Dividends paid by Barclays with respect to the shares or ADSs will
generally be qualified dividend income.
Under the Old Treaty, a US holder entitled to its benefits is entitled to
a tax credit from the UK Inland Revenue equal to the amount of the tax
credit available to a shareholder resident in the United Kingdom (i.e.
one-ninth of the dividend received), but the amount of the dividend plus
the amount of the refund are also subject to withholding in an amount
equal to the amount of the tax credit. A US holder that is eligible for the
benefits of the Old Treaty may include in the gross amount of the dividend
the UK tax deemed withheld from the dividend payment pursuant to
the Old Treaty. Subject to certain limitations, the UK tax withheld in
accordance with the Old Treaty and effectively paid over to the UK
Inland Revenue will be creditable against the US holder’s US federal
income tax liability, provided the US holder is eligible for the benefits of
the Old Treaty and has properly filed Internal Revenue Form 8833.
Special rules apply in determining the foreign tax credit limitation with
respect to dividends that are subject to the maximum 15% tax rate.
Under the New Treaty, a US holder will not be entitled to a UK tax credit,
but will also not be subject to UK withholding tax. The US holder will
include in gross income for US federal income tax purposes only the
amount of the dividend actually received from Barclays, and the receipt
of a dividend will not entitle the US holder to a foreign tax credit.
Dividends must be included in income when the US holder, in the case of
shares, or the 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. Dividends will be income from
sources outside the US, and will generally be ‘passive income’ or ‘financial
services income,’ which is treated separately from other types of income
for the purposes of computing any allowable foreign tax credit.
The amount of the dividend distribution will be the US Dollar value of
the pound Sterling payments made, determined at the spot Pound
Sterling/US Dollar rate on the date the dividend distribution is
includable in income, regardless of whether the payment is in fact
converted into US Dollars. Generally, any gain or loss resulting from
currency exchange fluctuations during the period from the date the
dividend payment is includable in income to the date the payment is
converted into US Dollars will be treated as ordinary income or loss and,
for foreign tax credit limitation purposes, from sources within the US.