Barclays 2009 Annual Report Download - page 335

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 333
Taxation
The following is a summary of the principal tax consequences for holders
of Ordinary Shares of Barclays PLC, Preference Shares of Barclays Bank PLC
(the Bank), or ADSs representing such Ordinary Shares or Preference Shares,
and who are citizens or residents of the UK or US, or otherwise who are
subject to UK tax or US federal income tax on a net income basis in respect
of such securities, that own the shares or ADSs as capital assets for tax
purposes. It is not, however, a comprehensive analysis of all the potential
tax consequences for such holders, and it does not discuss the tax
consequences of members of special classes of holders subject to special
rules or holders that, directly or indirectly, hold 10% or more of Barclays
voting stock. Investors are advised to consult their tax advisers regarding
the tax implications of their particular holdings, including the consequences
under applicable state and local law, and in particular whether they are
eligible for the benefits of the Treaty, as defined below.
A US holder is a beneficial owner of shares or ADSs that is, for US federal
income tax purposes, (i) a citizen or resident of the US, (ii) a US domestic
corporation, (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. If a partnership
holds the shares or ADSs, the United States federal income tax treatment
of a partner will generally depend on the status of the partner and the tax
treatment of the partnership. A partner in a partnership holding the shares
or ADSs should consult its tax adviser with regard to the United States
federal income tax treatment of an investment in the shares or ADSs.
Unless otherwise noted, the statements of tax laws set out below are based
on the tax laws of the UK in force as at 5th March 2010 and are subject to
any subsequent changes in UK law, in particular any announcements made
in the Chancellor’s expected UK Budget in March 2010.
This section is also based on the Internal Revenue Code of 1986, as amended,
its legislative history, existing and proposed regulations, published rulings and
court decisions (the Code), and on the Double Taxation Convention between
the UK and the US as entered into force in March 2003 (the Treaty), all of
which are subject to change, possibly on a retroactive basis.
This section is based in part upon the representations of the ADR Depositary
and the assumption that each obligation of the Deposit Agreement and any
related agreement will be performed in accordance with its terms.
For purposes of the Treaty, the Estate and Gift Tax Convention between the
United Kingdom and the United States, and the Code, the holders of ADRs
evidencing ADSs will be treated as owners of the underlying ordinary shares
or preference shares, as the case may be. Generally, exchanges of shares
for ADRs and ADRs for shares will not be subject to US federal income tax
or to UK capital gains tax.
Taxation of UK holders
Taxation of dividends
In accordance with UK law, Barclays pays 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, 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/highest rates (currently 40%/50%), there will be a further
liability to tax. Higher/highest rate taxpayers are taxable on dividend income
at a special rate (currently 32.5%/42.5%) against which can be offset a tax
credit of one-ninth of the cash dividend received. Tax credits are not
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
Dividend Reinvestment 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 and
indexation relief (up to 5th April 1998). 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 may be
complex. Capital gains may also arise from the gifting of shares to connected
parties such as relatives (although not spouses or civil partners) 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
Stamp duty or stamp duty reserve tax at the rate of 0.5% is normally payable
on the purchase price of shares acquired.
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
Subject to PFIC rules discussed below, a US holder is subject to US federal
income taxation on the gross amount of any dividend paid by Barclays PLC
or Barclays Bank PLC, as applicable, 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
before 1st January 2011 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 121-day period beginning 60 days before the ex-dividend date
(or, in the case of preference shares or ADSs relating thereto, if the dividend
is attributable to a period or periods aggregating over 366 days, provided
that the holder holds the shares or ADSs for more than 90 days during the
181-day period beginning 90 days before the ex-dividend date) and meets
certain other holding period requirements. Dividends paid by Barclays, with
respect to the ordinary or preference shares or ADSs will generally be
qualified dividend income.
A US holder will not be subject to UK withholding tax. The US holder will
include in gross income for US federal income tax purposes the amount
of the dividend actually received. 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. For foreign tax
credit purposes, dividends will generally be income from sources outside the