RBS 2003 Annual Report Download - page 229

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Shareholder information
Annual Report and Accounts 2003
(unless the Inland Revenue directs otherwise). Where interest
has been paid under deduction of UK withholding tax, US
Holders may be able to recover the tax deducted under the Treaty.
If interest were paid under deduction of UK income tax (e.g. if
the PROs lost their listing), US Holders may be able to claim a
refund of the tax deducted under the Treaty.
Any paying agent or other person by or through whom interest
is paid to, or by whom interest is received on behalf of, an
individual, may be required to provide information in relation to
the payment and the individual concerned to the UK Inland
Revenue. The Inland Revenue may communicate this
information to the tax authorities of other jurisdictions.
The UK Inland Revenue confirmed at around the time of the
issue of the PROs that interest payments would not be treated
as distributions for UK tax purposes (i) by reason of the fact
that interest may be deferred under the terms of issue or (ii) by
reason of the undated nature of the PROs, provided that at the
time an interest payment is made, the PROs are not held by a
company which is ‘associated’ with the company or by a
‘funded company’. A company will be associated with the
company if, broadly speaking, it is part of the same group as
the company. A company will be a ‘funded company’ for these
purposes if there are arrangements involving that company
being put in funds (directly or indirectly) by the company, or an
entity associated with the company. In this respect, the Inland
Revenue has confirmed that a company holding an interest in
the PROs which incidentally has banking facilities with any
company associated with the company will not be a ‘funded
company’ by virtue of such facilities.
Interest on the PROs constitutes UK source income for tax
purposes and, as such, may be subject to income tax by
direct assessment even where paid without withholding.
However, interest with a UK source received without deduction
or withholding on account of UK tax will not be chargeable to
UK tax in the hands of a US Holder unless, in the case of a
corporate US Holder, such US Holder carries on a trade in the
UK through a UK permanent establishment or in the case of
other US Holders, such persons carry on a trade, profession or
vocation in the UK through a UK branch or agency in
connection with which the interest is received or to which the
PROs are attributable. There are exemptions for interest
received by certain categories of agent (such as some brokers
and investment managers).
EU Directive on taxation of savings income
The European Union has adopted a new directive regarding
the taxation of savings income. Subject to a number of
important conditions being met, Member States of the
European Union will be required from a date not earlier than 1
January 2005 to provide to the tax authorities of another
Member State details of payments of interest or other similar
income paid by a person within its jurisdiction to an individual
resident in that other Member State, except that Belgium,
Luxembourg and Austria will instead operate a withholding
system for a transitional period in relation to such payments
unless during such period they elect otherwise.
Disposal (including redemption)
A disposal (including redemption) of PROs by a US Holder,
who is an individual or other non corporation tax payer, will not
give rise to any liability to UK taxation on capital gains unless
the US Holder carries on a trade (which for this purpose
includes a profession or a vocation) in the UK through a
branch or agency and the PROs are, or have been, held or
acquired for the purposes of that trade, branch or agency.
A transfer of PROs by a US Holder will not give rise to a
charge to UK tax on accrued but unpaid interest payments,
unless the US Holder is an individual or other non corporation
tax payer and at any time in the relevant year of assessment or
accounting period carries on a trade in the UK through a
branch or agency to which the PROs are attributable.
Annual tax charges
Corporate holders of PROs may be subject to annual UK tax
charges (or relief) by reference to fluctuations in exchange
rates and in respect of profits, gains and losses arising from
the PROs, in place of the tax treatment referred to in the two
preceding paragraphs but only if such corporate US Holders
carry on a trade, profession or vocation in the UK through a
UK permanent establishment to which the PROs are
attributable.
Inheritance tax
In relation to PROs held through DTC (or any other clearing
system), the UK inheritance tax position is not free from doubt
in respect of a lifetime transfer, or death of, a US Holder who is
not domiciled nor deemed to be domiciled in the UK for
inheritance tax purposes; the UK Inland Revenue are known to
consider that the situs of securities held in this manner is not
necessarily determined by the place where the securities are
registered. In appropriate circumstances, there may be a
charge to UK inheritance tax as a result of a lifetime transfer at
less than fair market value by, or on the death of, such a US
Holder. However, exemption from, or a reduction of, any such
UK tax liability may be available under the Estate Tax Treaty.
US Holders should consult their professional advisers in
relation to such potential liability.
Stamp duty and SDRT
No stamp duty, SDRT or similar tax is imposed in the UK on the
issue, transfer or redemption of the PROs.
Exchange controls
The company has been advised that there are currently no UK
laws, decrees or regulations which would prevent the remittance
of dividends or other payments to non-UK resident holders of
the company’s non-cumulative dollar preference shares.
There are no restrictions under the articles of association of
the company or under UK law, as currently in effect, which limit
the right of non-UK resident owners to hold or, when entitled to
vote, freely to vote the company’s non-cumulative dollar
preference shares.