RBS 2007 Annual Report Download - page 246

RBS Group • Annual Report and Accounts 2007
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Shareholder information continued
Shareholder information
Taxation of capital gains
A US Holder that is not resident (or, in the case of an
individual, ordinarily resident) in the UK will not normally be
liable for UK tax on capital gains realised on the disposition of
an ordinary share, a non-cumulative dollar preference share,
an ordinary ADS or a preference ADS unless at the time of
the disposal, in the case of a corporate US Holder, such US
Holder carries on a trade in the UK through a permanent
establishment or, in the case of any other US Holder, such US
Holder carries on a trade, profession or vocation in the UK
through a UK branch or agency and such ordinary share,
non-cumulative dollar preference share, ordinary ADS or
preference ADS is or has been used, held or acquired by or
for the purposes of such trade (or profession or vocation),
permanent establishment, branch or agency. Special rules
apply to individuals who are temporarily not resident or
ordinarily resident in the UK.
A US Holder will, upon the sale or other disposition of an
ordinary share, a non-cumulative dollar preference share, an
ordinary ADS or a preference ADS, or upon the redemption of
a non-cumulative dollar preference share or preference ADS,
generally recognise capital gain or loss for US federal income tax
purposes (assuming that in the case of a redemption of a non-
cumulative dollar preference share or a preference ADS, such US
Holder does not own, and is not deemed to own, any ordinary
shares or ordinary ADSs of the company) in an amount equal to
the difference between the amount realised (excluding in the
case of a redemption any amount treated as a dividend for US
federal income tax purposes, which will be taxed accordingly)
and the US Holder’s tax basis in such share or ADS. This capital
gain or loss will be long-term capital gain or loss if the US
Holder held the share or ADS so sold, disposed or redeemed
for more than one year.
A US Holder who is liable for both UK and US tax on a gain
recognised on the disposal of an ordinary share, a non-
cumulative dollar preference share, an ordinary ADS or a
preference ADS will generally be entitled, subject to certain
limitations, to credit the UK tax against its US federal income
tax liability in respect of such gain.
If a corporate US Holder is subject to UK corporation tax by
reason of carrying on a trade in the UK through a permanent
establishment and its ordinary share, non-cumulative dollar
preference share or ADS is, or has been, used, held or
acquired for the purposes of that permanent establishment,
certain provisions introduced by the Finance (No. 2) Act 2005
will apply if the US Holder holds its ordinary share, non-
cumulative dollar preference share or ADS for a “tax avoidance
purpose”. If these provisions apply, dividends on the ordinary
share, non-cumulative dollar preference share, ordinary ADS or
preference ADS, as well as certain fair value credits and debits
arising in respect of such share or ADS, will be brought within
the charge to UK corporation tax on income and the UK tax
position outlined in the preceding paragraphs will not apply in
relation to such US Holder.
Estate and gift tax
Subject to the discussion of the Estate Tax Treaty in the next
paragraph, ordinary shares, non-cumulative dollar preference
shares, ordinary ADSs or preference ADSs beneficially owned
by an individual may be subject to UK inheritance tax (subject
to exemptions and reliefs) on the death of the individual or in
certain circumstances, if such shares or ADSs are the subject
of a gift (including a transfer at less than market value) by such
individual. (Inheritance tax is not generally chargeable on gifts
to individuals made more than seven years before the death of
the donor). Ordinary shares, non-cumulative dollar preference
shares, ordinary ADSs or preference ADSs held by the trustees
of a settlement will also be subject to UK inheritance tax.
Special rules apply to such settlements.
An ordinary share, a non-cumulative dollar preference share,
an ordinary ADS or a preference ADS beneficially owned by
an individual, whose domicile is determined to be the United
States for purposes of the Estate Tax Treaty and who is not a
national of the UK, will not be subject to UK inheritance tax on
the individual’s death or on a lifetime transfer of such share or
ADS, except in certain cases where the share or ADS (i) is
comprised in a settlement (unless, at the time of the
settlement, the settlor was domiciled in the United States and
was not a national of the UK); (ii) is part of the business
property of a UK permanent establishment of an enterprise; or
(iii) pertains to a UK fixed base of an individual used for the
performance of independent personal services. The Estate Tax
Treaty generally provides a credit against US federal estate or
gift tax liability for the amount of any tax paid in the UK in a
case where the ordinary share, non-cumulative dollar
preference share, ordinary ADS or preference ADS is subject
to both UK inheritance tax and US federal estate or gift tax.
UK stamp duty and stamp duty reserve tax (“SDRT”)
The following is a summary of the UK stamp duty and SDRT
consequences of transferring an ADS or ADR in registered
form (otherwise than to the custodian on cancellation of the
ADS) or of transferring an ordinary share or a non-cumulative
dollar preference share. A transfer of a registered ADS or ADR
executed and retained in the United States will not give rise to
stamp duty and an agreement to transfer a registered ADS or
ADR will not give rise to SDRT. Stamp duty or SDRT will
normally be payable on or in respect of transfers of ordinary
shares or non-cumulative dollar preference shares and
accordingly any holder who acquires or intends to acquire
ordinary shares or non-cumulative dollar preference shares is
advised to consult its own tax advisers in relation to stamp
duty and SDRT.