What does a foreign takeover mean for a UK shareholder?

Alliance & Leicester shareholders are to vote on a £1.3bn takeover by Banco Santander, which involves them giving up three of their A&L shares for one in Santander. This means they will receive dividends on foreign-listed shares. So what are the tax implications?

Shareholders in Alliance & Leicester are having to vote on a £1.3bn takeover deal, which will involve them giving up three of their existing shares for one in predator Banco Santander. That means subsequently receiving dividends on foreign-listed, rather than UK-listed, shares. So what are the tax implications?

As Mike Warburton says in the FT, there's good news for higher-rate taxpayers. Foreign dividends now qualify for a "notional 10% tax credit", similar to that attached to British dividends. Say you are due to receive a £90 dividend on your Spanish shares. Spanish tax rules require local firms to "withhold" 18% as local tax. That reduces the cash you receive to £73.80 (0.82 x £90).

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.