2005 media releases

Inland Revenue releases view on HHG capital reduction proposals
27 April 2005

Inland Revenue has released its preliminary view on the tax implications arising from the proposed capital reduction proposals related to the sale of HHG plc's life services business to Life Company Investor Group Limited.

Following the sale, HHG proposes to return about £875 million in cash to shareholders through two main steps set out in the HHG Shareholder Circular known as the Return of Cash and the Reduction of Investor Base proposals.

HHG was de-merged from AMP Limited and listed separately in December 2003. Many New Zealand taxpayers now hold interests in HHG known as CHESS Depository Interests (CDIs), each interest representing one HHG ordinary share. The Commissioner of Inland Revenue considers each CDI holder to be a shareholder in HHG for New Zealand income tax purposes.

Martin Scott, Inland Revenue Group Manager Field Delivery, said today that the capital reduction proposals, if they proceed as HHG has proposed, will be tax neutral for many of the around 80,000 New Zealand-resident CDI holders affected, who hold their shares as capital investments. However, there will be a number of CDI holders whose cancellation amounts will constitute a dividend for New Zealand tax purposes, particularly those with more than around 6,000 CDIs on the record date.

Mr Scott said: "Where a non-corporate CDI holder's cancellation amounts do constitute a dividend, then this amount will need to be returned as income in their tax return. Inland Revenue's preliminary view issued today is based on detailed analysis of the HHG proposal, to provide certainty for HHG's New Zealand-resident CDI holders."

Inland Revenue's preliminary view is provided in a 'Questions We've Been Asked' item which is published in full in Tax Information Bulletin Vol 17 No 2 (March 2005). A copy of the QWBA is now on the Inland Revenue website at www.ird.govt.nz. HHG's proposed capital reduction is expected to occur in April 2005.

Any taxpayers concerned about their position should talk to a tax professional or contact Inland Revenue.

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more media releases ›

Corporate Affairs
Inland Revenue

To make a media query:
Phone 04 890 1698 or email mediaqueries@ird.govt.nz
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New Zealand

Date published: 27 Apr 2005

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