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UK taxation

Dividends

When a dividend is paid, you will receive a tax voucher showing the net amount of dividend received and the tax deemed to have been paid.
From 6 April 1999 the tax credit on dividends was reduced from 20% to 10% of the gross amount.

The dividends received on your shareholding are treated as though they had been paid after deduction of income tax at the lower rate.
Broadly, if you are an individual resident in the UK, and:

Pay tax at the lower or basic rate

There is no further tax to pay.

Pay tax at a higher rate

You will be taxed at a special rate of 32.5% of the gross dividend. You will have to pay the extra 22.5% (over the 10% tax credit) when you settle your overall tax bill for the year. You should retain your tax vouchers in case your tax office wants to see them.

You do not pay tax

You will be unable to reclaim the tax credit (unless shares are held within an Individual Savings Account or by a charity).

We would recommend that you consult with your financial adviser on any tax issues.

Disposal of Shares

A charge to capital gains tax (CGT) may arise when you dispose of a chargeable asset - for example shares - which is worth more than when you acquired it. If you make a loss on the disposal of a chargeable asset, this may reduce the gains made on sales of other chargeable assets. You are liable to pay tax on your total chargeable gains arising on chargeable disposals you make in any one tax year (after any reliefs that may be available) in excess of the annual exemption limit.

The annual exemption limit for CGT for UK residents for the tax year 2006-07 is £8,800.

CGT can be complex, so if you are in any doubt, you should contact the Inland Revenue or an appropriate financial adviser. You should be aware that the level and basis of the taxation of capital gains may change.

Please note that WHSmith PLC, nor its Registrar, can advise on any aspects of CGT.

Demerger 31 August 2006

Following the demerger of the Company on 31 August 2006, in order to calculate any chargeable gains or losses arising on the disposal of shares after 31 August 2006, the original tax base cost of your ordinary shares of 2 13/81p (adjusted if you held your shares at 24 September 2004 and 22 May 1998 to take into account the capital reorganisations of 27 September 2004 and 26 May 1998 respectively (see below)) will be apportioned between the shareholdings of ordinary shares of 20p in the Company and ordinary shares of 5p in Smiths News in the ratio of 0.69585 and 0.30415 respectively.

Capital reorganisation 27 September 2004

If you acquired your shareholding on or before 24 September 2004, in order to calculate any chargeable gains or losses arising on the disposal of shares after 24 September, the original tax base cost of your ordinary shares of 55 5/9p (adjusted if you held your shares as at 22 May 1998 to take into account the capital reorganisation of 26 May 1998 (see below)) will have to be apportioned between the shareholdings of ordinary shares of 2 13/81p and 'C' shares resulting from the capital reorganisation. The cost of your shareholding of ordinary shares of 2 13/81p is calculated by multiplying the original base cost of your ordinary shares of 55 5/9p (adjusted where necessary to take into account the capital reorganisation of 26 May 1998 referred to above) by 0.73979.

The cost of the 'C' shares is calculated by multiplying the original base cost of your ordinary shares of 55 5/9p (again adjusted where necessary, to take into account the capital reorganisation of 26 May 1998 referred to above) by 0.26021.

Capital reorganisation 26 May 1998

If you acquired your shareholding on or before 22 May 1998, in order to calculate any chargeable gains or losses arising on the disposal of shares after 22 May 1998, the original tax base cost of your ordinary shares of 50p will have to be apportioned between the shareholdings of ordinary shares of 55 5/9p and redeemable 'B' shares resulting from the capital reorganisation.

The cost of your shareholding of ordinary shares of 55 5/9p is calculated by multiplying the original cost of your ordinary shares of 50p by 0.90714.

The cost of the 'B' shares is calculated by multiplying the original cost of your ordinary shares of 50p by 0.09286.

March 1982 Values

31 March 1982 base values per share:

  Arising from an original shareholding of
  'A' Ordinary Shares 'B' Ordinary Shares
Ordinary Shares of 2 13/81p 88.55p 73.17p
'B' Shares 7.94p 6.56p
'C' Shares 22.42p 18.53p
 
5 3/4 per cent Cumulative Preference Shares of £1 each 42.50p
5 1/8 per cent Redeemable Unsecured Loan Stock