Diageo plc – UK Capital Gains Tax Fact Sheet
Shareholders to whom this fact sheet is applicable
The information in this fact sheet is applicable to shareholders who are individuals
resident or ordinarily resident in the UK for tax purposes, who hold their shares as
investments (and not as securities to be realised in the course of a trade), who are
not employees of a company in the Diageo group, and who are the beneficial owners
of the shares.
Shareholders who acquired their Diageo plc shares (or the shares from which these
are derived) other than through an arm's length purchase in the open market should
consult their advisers as regards their Capital Gains Tax position.
Shareholders who dispose of their Diageo plc shares other than through an arm's
length sale in the open market should consult their advisers as regards their Capital
Gains Tax position.
General information
The information in this fact sheet is designed to assist shareholders and their
advisers in the calculation of any UK Capital Gains Tax arising on the sale or
redemption of Diageo plc shares following the reorganisation of the company's share
capital into Consolidated Ordinary shares and B shares. Details of the share
reorganisation were set out in the Information Memorandum dated 22 December
1997.
The reorganisation of the Diageo plc share capital into Consolidated Ordinary shares
and B shares falls under the provisions of Sections 126 - 131 Taxation of Chargeable
Gains Act 1992. Consequently, the reorganisation is not regarded as a disposal of
any Diageo plc shares for UK Capital Gains Tax purposes.
Following the reorganisation, the Consolidated Ordinary shares and the B shares are
treated as separate classes of shares for UK Capital Gains Tax purposes. The
Capital Gains Tax base cost of shareholders' old Diageo plc shares should be
apportioned between the two new classes of shares by reference to the quoted
market values of the two new classes on the first day of trading after the
reorganisation (2 February 1998). The quoted market values of the new shares on
the London Stock Exchange on 2 February 1998 were as follows:
Consolidated Ordinary shares 549.0p
B shares 500.5p
This fact sheet provides shareholders with information and guidance to assist them in
completing the necessary Capital Gains calculations.
Instructions to shareholders
In order to calculate the Capital Gain on the sale or redemption of their Diageo plc
Consolidated Ordinary Shares or B shares after the reorganisation shareholders will
need to take the following steps:
1. Identify the Capital Gains Tax base cost attributable to their Diageo plc
Ordinary Shares prior to the reorganisation. Further instructions on this are
set out in the section “Identifying the original Capital Gains’ base cost of
Diageo plc shares”.Click here to access
2. Apportion the base cost so identified between the Diageo plc Consolidated
Ordinary shares and B shares subsequently issued. Example calculations
showing the way in which the apportionment should be performed are set out
in the Examples section. Click here to access.
3. Calculate the indexation allowance available in respect of the shares. This is
done by multiplying the identified base cost of the shares sold or redeemed
by a factor representing the difference between the Retail Price Index (“RPI”)
at the time the original shareholding was acquired (or 31 March 1982 if later)
and the RPI at the time the shares are sold/redeemed. Examples of this
calculation are included in the Examples section Click here to access.
A table setting out the latest available RPI factors is provided in Table 1. Click
here to access.
For sale of shares on or after 6 April 1998, indexation is calculated up to 5
April 1998.
4. With effect from 6 April 1998, taper relief will be available after indexation has
been calculated.
Taper relief reduces the Capital Gain by a certain percentage; this percentage is
determined by the length of time the shares have been held after 6 April 1998. The
longer the shares have been held, the greater the percentage used to reduce the
gain. In calculating how long the shares are held, only complete years after 6 April
1998 can be used.
However, where the shares have been held before 17 March 1998, an additional
year will be added to the number of complete years after 6 April 1998. If shareholders
held the Consolidated Ordinary shares and the B shares before 17 March 1998, they
will both qualify for the additional year.
In order to obtain taper relief on either class of shares, each shareholder must own
the shares for at least 3 complete years. Therefore, looking at the table in Table 2, in
order to obtain any taper relief a shareholder, owning shares at 16 March 1998, must
hold the shares until 2 complete years after 6 April 1998 (6 April 2000) because, with
the additional year, this will make the necessary three years. Shareholders who
purchased their Diageo shares on or after 17 March 1998 will have to own their
shares for 3 complete years after 6 April 1998 (6 April 2001) in order to obtain taper
relief.
Different taper relief rules apply to shareholders who are Diageo employees and who
dispose of shares on or after 6 April 2000. Such shareholders should seek
independent advice.
Click here to return to capital gains tax information