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FACTBOX-How tax credits become a subsidy for UK investors

contrast, Tesco's corporate tax charge at 43 percent of
Friday, 20 Dec 2013 | 3:13 AM ET

(This accompanies story "The Great British tax giveaway" ) Dec 20 (Reuters) - Many big British firms examined by Reuters pay dividends that far outweigh their UK tax payments. Under the British system, this means shareholders receive more in tax credits than they pay in corporate income tax. Experts say tax credits start to become a tax subsidy when the corporation tax bill falls to below 10 percent of the dividend payment. In the most recent reporting period, the combined tax charge for the 16 biggest UK dividend payers investigated by Reuters was just 6 percent of the amount the companies paid in dividends - so investors in most firms received more in tax credit than they lost in corporate income tax. The table below lists the companies whose accounts Reuters examined. For example, Diageo's corporate tax bill is just 3 percent of the total it paid out in dividends. This shows UK private investors in the firm have received tax credits in excess of their share of Diageo's UK tax bill. dividends shows its investors' tax credits did not outweigh their share of the retailer's corporate income tax. Anglo had a tax credit and BAT paid no tax, so in both cases the dividend tax credit was higher than tax paid.

* Corporate tax and dividends paid by some UK blue chips in the most recent financial year (millions of pounds)

Company UK tax credit(tax Total Tax charge charge is dividend as pct of preceded by -) payout dividend* Anglo 7.6 686 0 Aviva 34 557 0 BAT 0 2,604 0 BT -639 654 98 Cairn Energy 0 2,208 0 Diageo -31 1,086 3 GSK -185 3,608 5 HSBC -37.9 8,300 0 Imperial -6 1,124 1

Tobacco

Lloyds -117 - n/a National Grid -289 1,494 19 Old Mutual -18 1,227 1 Reed Elsevier -73 523 14 Standard -70 1,272 6

Chartered

Tesco -507 1,182 43 Vodafone 0 4,985 0

* Percentage is zero where there is no tax paid, or a tax credit

(Reporting by Tom Bergin)

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