Tax 2006/07

Completing the Self-Assessment Tax Return 2006/07


The following notes have been produced to assist employee shareholders to complete their self-assessment Tax Returns for the tax year 2006/07. These notes do not in any way constitute any financial advice.

If you are in any doubt with regards the completion of the tax form, please consult your financial advisor.

Additional information can be found on the HM Revenue and Customs web site.

There are three areas to consider:
  1. How to specify Foreign Dividends received from your Thales share holding (1998/2000)
  2. How to specify Foreign Dividends received from your Thales share holding (2002)
  3. Profit Sharing Scheme Shares
Note that there are different ways of completing the tax form depending on personal circumstances. The notes below detail one approach which has been obtained following discussions with a technical advisor at a tax office.

Dividends - 1998/2000 scheme

In June 2006, you received a gross dividend of €0.83 (which is equivalent to £0.5648) for each Thales share held. French witholding tax equivalent to £0.1412 has already been deducted.

You need to request the foreign pages of the self-assessment tax return (form SA106) by contacting the HM Revenue and Customs orderline on 0845 9000 404 or download from the HM Revenue and Customs web site.

Page F1 of tax form FOREIGN should be filled in as follows:

  1. Column A France
  2. Column B 0.5648*no of shares
  3. Column C 0.1412*no of shares
  4. Column D 0
  5. Column E 0.5648*no of shares
  6. Box 6.2 0.4236*no of shares
  7. If completing the tax form after 30th September 2007, box 6.9 is also required to be completed

The exchange rate used was £1 = €1.46950

Note 1: A UK resident shareholder can make arrangement to receive the dividend under a deduction treaty rate of 15% instead of suffering the withholding at 25%.

Dividends - 2002 scheme

In July 2006, Creelia sent details of the dividend paid in respect of the 2002 offer that was paid on 31 May 2006. This only applies to those shareholders who have Classic units. Please follow the following guidelines.

Page F1 of tax form FOREIGN should be filled in as follows:

  1. Column A France
  2. Column B 0.5687*no of classic shares
  3. Column C 0.1422*no of classic shares
  4. Column D 0
  5. Column E 0.5687*no of classic shares
  6. Box 6.2 0.4265*no of classic shares
  7. If completing the tax form after 30th September 2007, box 6.9 is also required to be completed

The exchange rate used was £1 = €1.45943.

Dividends - 2004 scheme

If you are still employed by Thales, then any dividends obtained under this scheme are tax free.

Profit Sharing Scheme Shares Award

This applies only if any shares awarded to you under the approved profit sharing scheme have been removed from the trust in the tax year 2006/07. If this is the case, the taxable amount and tax deducted under PAYE are specified in the figures at 1.8 and 1.11 of the employment pages.

Capital Gains

Caveat (added 31/1/08):  The Chancellor announced in his Pre-Budget Report that from next April (2008) taper relief will be abolished and instead a flat rate of CGT of 18% will be introduced.  Further, there will be a change to the pooling basis of share identification when an individual acquires shares in a company at different times. Under the new pooling system, when an individual acquires shares in a company at different times, subject to certain exceptions, the costs of the shares will be pooled together to calculate an average figure for base cost rather than the old “last in, first out” rules.

If you hold shares that attract taper relief at the business rate (after two years producing an effective tax rate of 10%), you may want to consider if you should sell those shares before the new rules, to take advantage of the currently available taper relief. Keep in mind that buying and selling shares is an investment decision and whereas tax may be an important consideration in that process, there are other factors to consider.

If you did not dispose of any shares or other assets during the tax year 2006/07 then there is nothing to complete. Capital Gains is a personal matter and any advice has to be tailored to individual circumstances - any further advice should be obtained from a financial adviser.

Note that resultant gains together with all other capital gains are subject to exemption on the first £8800.

The order of shares sold (known as matching rules) by individuals for CGT purposes is as follows:

The amount of capital gains tax payable on any capital gain may depend on a number of factors including:

  • the availability of your capital gains tax annual exemption (£8,800 for 2006/07);
  • the availability of taper relief. Taper relief operates to reduce the amount of chargeable gain that is subject to capital gains tax by reference to the length of period of ownership of the shares. Taper relief will be applied based on the number of complete years from the date of purchase until the date of disposal;
  • the interaction of any capital losses you have available;
  • whether you are a higher or basic rate taxpayer.

If you do not sell all the shares you hold or you acquire additional shares within 30 days of the sale, there are complex matching rules to establish which shares are deemed to have been sold for the purpose of determining your chargeable gain. The matching rules mean you cannot choose which shares to sell.

The matching rules operate as follows for sales of shares you hold, assuming all shares were acquired post 5 April 1998:

  • shares sold will first be matched with shares acquired on the same day;
  • shares will then be matched with shares acquired in the 30 days following the date of sale, so you could be deemed to have sold shares you did not own at the date of sale; and
  • finally, shares sold are matched with Shares previously acquired on a “last in first out” basis (i.e. the Shares acquired on a later date are deemed to be sold before shares acquired on an earlier date).

As with all personal tax matters, you should consult with your personal tax adviser, if these rules apply as the rules are complex.

When you dispose of your shares, and your aggregate capital gains for the year are in excess of the annual exemption (£8,800 for 2006/07) or your sale proceeds are more than four times the annual exemption (£35,200 for 2006/07), any capital gains must be reported on the capital gains pages of the tax return for that tax year.