Prospectus re Admission to the Official List - Heritage Oil

to change. Where the Company pays a dividend to a holder of Ordinary Shares being anindividual resident in the U.K. (for the purposes of U.K. tax law) that person may beentitled to a tax credit in respect of the dividend received. These provisions are expectedto apply to an individual who owns less than 10 per cent. of the Ordinary Shares in theCompany provided that that individual receives less than £5,000 in dividends in any taxyear from companies which are not resident in the U.K. for tax purposes. The value of thetax credit is currently one ninth of the amount of the dividend received (or 10 per cent. ofthe aggregate of the amount of the dividend and tax credit). Such an individual will beliable to income tax on an amount equal to the aggregate of the dividend and tax credit(the ‘‘gross dividend’’), which will be regarded as the top slice of his income for taxpurposes and will be subject to U.K. income tax at the special dividend rate of tax asdescribed below.Individuals who are not liable to income tax at a rate greater than basic rate (i.e. those whopay tax at the lower or basic rate only) will be liable to tax on the gross dividend at the‘‘dividend ordinary rate’’ of 10 per cent. This means that the tax credit will satisfy suchindividual’s liability to pay income tax in respect of the gross dividend and there will be nofurther tax to pay and no right to claim any repayment of the tax credit from the HMRC.In the case of individuals who are liable to income tax at the higher rate, tax will bepayable on dividends at the ‘‘dividend upper rate’’ (currently 32.5 per cent.). The10 per cent. tax credit will be set against his liability to tax in respect of the gross dividend.Therefore, he will have to pay additional tax equal to 22.5 per cent. of the gross dividend(or 25 per cent. of the net dividend received), to the extent that the gross dividend, whentreated as the top slice of his income, falls above the threshold for higher rate income tax.Individual holders of Ordinary Shares who are not liable to income tax in respect of thegross dividend income cannot reclaim payment of the tax credit from HM Revenueand Customs.Subject to certain exceptions, a corporate Shareholder which is resident for tax purposesin the U.K. is not liable to tax on a dividend paid by the Company to it and is not able toclaim repayment of the tax credit attaching to the dividend.(iv) Capital Gains TaxA disposal or deemed disposal of capital assets by a U.K. resident or ordinarily residentshareholder will give rise to either a chargeable gain or an allowable loss. Gains and lossesare calculated by deducting from the sale proceeds or, in some instances from the marketvalue of the time of disposal, the original cost and incidental costs of acquisition andincidental costs of disposal. Recipients within the charge to corporation tax may beentitled to an indexation allowance in computing a capital gain. Currently, a U.K. residentindividual or trustee may be entitled to taper relief in computing a capital gain or loss. It isexpected that taper relief will be abolished for disposals after 5 April 2008. U.K. residentindividuals or trustees may also be entitled to an annual allowance in arriving at theamount on which they are charged capital gains tax.A disposal or deemed disposal of a capital asset by a U.K. resident or ordinarily residentindividual who is not domiciled in the U.K., will be liable to U.K. capital gains tax(‘‘CGT’’) in the same way as for a U.K. domiciled individual unless the asset is situatedoutside of the U.K. at the time of disposal. Where the asset is non-U.K. situated, gains willonly be taxed to the extent that the gains are (or are deemed to be) remitted to theU.K. As the Company is incorporated outside of the U.K., and as its principal register ismaintained outside of the U.K. it is expected that the Ordinary Shares will be deemed tobe non-U.K. situated for these purposes. Various changes to remittance basis are expectedto take place after 5 April 2008. An individual claiming the remittance basis may losecertain tax allowance and, in certain cases, an individual may be charged a flat rate sum ofmoney before the remittance basis can apply.If an individual ceases to be resident or ordinarily resident in the U.K. for a period of lessthan five years and disposes of the Ordinary Shares, in certain circumstances any gain onthat disposal may be liable to U.K. CGT upon that holder becoming once again resident orordinarily resident in the U.K.287