RBS 2009 Annual Report Download - page 382

Shareholder information continued
RBS Group Annual Report and Accounts 2009380
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
may 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.
PROs
United States
Payments of interest on a PRO (including any UK withholding tax, as to
which see below) will constitute foreign source dividend income for US
federal income tax purposes to the extent paid out of the current or
accumulated earnings and profits of the company, as determined for US
federal income tax purposes. Because the company does not maintain
calculations of its earnings and profits under US federal income tax
principles, it is expected that distributions will be reported to US
Holders as dividends. Payments will not be eligible for the dividends-
received deduction generally allowed to corporate US holders. A US
Holder who is entitled under the Treaty to a refund of UK tax, if any,
withheld on a payment will not be entitled to claim a foreign tax credit
with respect to such tax.
Subject to applicable limitations that may vary depending upon a
holder’s individual circumstances, dividends paid to certain non-
corporate US Holders in taxable years beginning before 1 January 2011
will be taxable at a maximum tax rate of 15%. Non-corporate US
Holders should consult their own tax advisers to determine whether they
are subject to any special rules that limit their ability to be taxed at this
favourable rate. A US Holder will, upon the sale, exchange or
redemption of a PRO, generally recognise capital gain or loss for US
federal income tax purposes (assuming that in the case of a
redemption, 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 any
amount in respect of mandatory interest and any missed payments
which are to be satisfied on a missed payment satisfaction date, which
would be treated as ordinary income) and the US Holder’s tax basis in
the PRO.
A US Holder who is liable for both UK and US tax on gain recognised
on the disposal of PROs 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.