Untitled - David Kronemyer

computed as above. Individuals who (after taking account oftheir receipt ofdividend or
Ordinary Shares calculated on the basis ofthe Cash Equivalent) pay only basic rate income
ux, will have no further liability to tax on the receipt ofthe Scrip Shares.
Individuals taking Scrip Shares who are liable to higher rate income tax will be liable to
tax on the basis that they have received gross income calculated (as shown in the preceding
paragraph) by reference to the Cash Equivalent. Thus, forexample, where a taxpayer's
effective rate oftax on his dividend entitlement is 40olo he would be liable under the above
example to pay additional tax ofJl5 on a dividend entitlement off75 taken as Scrip Shares of
that value,
. Where individuals receive a dividend in cash, and their income tax liability is less than
the tax credit attached to the dividend, they are entitled to make a repayment claim in respect
ofthe amount by which the ta-x credit exceeds their liability. No repayment claim can be
made on Scrip Shares taken instead ofcash dividend and therefore individuals who do
not pay income tax should consider carefully before deciding whether to elect to tak€
Shares.
In all cases, ifan election to take Scrip Shares is made, the amount of the Cash
Equivalent will be treated forcapital gains tax purposes as being additional consideration
given for the Ordinary Shares (including the Scrip Shares).
Discretionary and accumulation trusts:
Where trustees who are liable to the additional rate of income tax elect to receive Scrip Shares,
the same grossingup procedure as outlined above for individuals will apply. Thus, forthe
purposes ofcharging the additional rate oftax, the trustees will be treated as having received
gross income ofan amount which, when reduced by income tax at the basic rate, is equal to the
Cash Equivalent. For capital gains tax purposes the amount ofthe Cash Equivalent will be
treated as being additional consideration given for the Ordinary Shares (including the Scrip
Shares).
UK resident corporate shareholders:
Fora Corporate Shareholder resident in the United Kingdom, Scrip Shares will not be treated
as franked investment income for corporation tax purposes. Corporation tax will not be
chargeable on Scrip Shares issued. For the purposes ofcorporation tax on chargeable gains no
consideration will be treated as having been given for the Scrip Shares, unless the recipient is
a close company. In such a case the amount ofthe Cash Equivalent will be treated as income of
the close company in determining the amount to be apportioned amongst participators and
taxed as their income. An equal amount will be treated as additional consideration given by
the close company for the Ordinary Shares (includingthe Scrip Shares).
Gross funds:
As the allotment ofthe Scrip Shares will not be treated as a qualifying distribution, no tax
credit will attach to the Scrip Shares and no repayment claim can be made in respect thereof.
This summary ofthe taxation treatment is not exhaustive and, in particular, does not
take account ofthe position of any non-UK resident shareholder. Ifyou are not sure
how you will be affected, you should consult your professional adviser before deciding
whether or not to make an election.
3. HOW TO MAKE THI] ELECTION
Ifyou wish to receive the cash dividend on the whole ofyour holding, do not complete and
return the Notice ofElection.
Ifyou hold 41 or more Ordinary Shares and you wish to receive Scrip Shares instead ofa
cash dividend in respect ofall or any part ofyour holding, you should complete the enclosed
Notice of Election and send it duly folded in the form ofa reply-paid envelope, to the
Company's Registrar, National Westminster Bank PLC, Registrar's Department, Caxton
House, Redcliffe Way, Bristol BS99 7NH, so as to reach them not later than 3.0Opm on
2 September, 1988. Ifthe Notice of Election is not received by the close ofbusiness on that
date a cash dividend will be paid in respect ofall the Ordinary Shares that you hold. No
acknowledgemenl ofNotices ofElection will be given.