RBS 2005 Annual Report Download - page 268

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Shareholder information
Shareholder information continued
Taxation for US Holders (continued)
HM Revenue & Customs has confirmed that a company
holding an interest in X-CAPs 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 X-CAPs constitutes UK source income for UK
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
X-CAPs are attributable. There are exemptions for interest
received by certain categories of agents (such as some
brokers and investment managers).
EU Directive on taxation of savings income
The European Union has adopted a directive regarding the
taxation of savings income. The Directive requires Member
States of the European Union to provide to the tax authorities
of other Member States details of payments of interest or other
similar income paid by a person to an individual in another
Member State, except that Belgium, Luxembourg and Austria
are instead imposing a withholding system for a transitional
period unless during such period they elect otherwise.
Disposal (including redemption)
A disposal (including redemption) of X-CAPs by a non-
corporate US Holder 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 vocation)
in the UK through a branch or agency and the X-CAPs are,
or have been, held or acquired for the purposes of that trade,
branch or agency. The exchange by such US Holder of
X-CAPs for preference shares or ADSs pursuant to the
company’s exercise of its exchange right will not give rise to
a charge to UK tax on capital gains even if such US Holder
would be subject to tax on a disposal of such holder’s X-CAPs
in accordance with the tax treatment referred to previously.
A transfer of X-CAPs 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-corporate
taxpayer 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 X-CAPs are attributable.
Annual tax charges
Corporate US Holders of X-CAPs 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 X-CAPs, 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 X-CAPs are attributable.
Inheritance tax
X-CAPs in bearer form physically held outside the UK should
not be subject to UK inheritance tax in respect of a lifetime
transfer by, or the death of, a US Holder who is neither
domiciled nor deemed to be domiciled in the UK for
inheritance tax purposes. However, in relation to X-CAPs held
through DTC (or any other clearing system), the position is not
free from doubt and the HM Revenue and Customs is known to
consider that the situs of securities held in this manner is not
necessarily determined by the place in which the securities are
physically held. If X-CAPs in bearer form are or become
situated in the UK, or if X-CAPs are held in registered form,
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 US Holder. However, exemption from, or a
reduction of, any such UK tax liability may be available under
the Estate Tax Treaty in the same manner as for non-cumulative
dollar preference shares. US Holders should consult their
professional advisers in relation to such potential liability.
Stamp duty and SDRT
No UK stamp duty is payable on the transfer by delivery or
redemption of bearer X-CAPs, whether in definitive form or in
the form of one or more global X-CAPs. No SDRT is payable
on any agreement to transfer bearer X-CAPs, provided that the
agreement is not made in contemplation of, or as part of an
arrangement for, a takeover of the company.
No UK stamp duty will be payable in respect of any instrument
of transfer of depositary interests representing X-CAPs,
provided that any instrument relating to such transfer is not
executed in the UK, and remains at all times outside the UK.
Depositary interests representing X-CAPs will not be
“chargeable securities” for SDRT purposes, and consequently
a transfer of such depositary interests will not be subject to
SDRT. Although the position is not clear, the transfer on the sale
of X-CAPs in registered form may attract ad valorem UK stamp
duty or (if an unconditional agreement to transfer X-CAPs is
not completed by a duly stamped transfer) UK SDRT, generally
at the rate of 0.5% of the consideration paid, which, in the
case of stamp duty, will be rounded up to £5 or multiples
thereof. The transfer of X-CAPs in registered form to, or to a
nominee or agent for, a person whose business (i) is or
includes issuing depositary receipts or (ii) is or includes the
provision of clearance services, may give rise to a liability to
UK stamp duty or (to the extent that UK stamp duty is not paid
on an instrument of transfer) UK SDRT, generally at the rate of
1.5% of the price of the X-CAPs transferred, which, in the case
of stamp duty, will be rounded up to £5 or multiples thereof.
Such transfer of X-CAPs in bearer form may give rise to a
charge to UK SDRT generally at the rate of 1.5% of the price
of the X-CAPs transferred. A charge to UK SDRT may also
arise on the issue of X-CAPs whether in registered or bearer
form to, or to a nominee or agent for, a person whose business
is or includes issuing depositary receipts or includes the
provision of clearance services, generally at the rate of 1.5%
of the price of the X-CAPs issued.