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This statement confirms the Commissioner's position in "HHG PLC Capital Reduction Proposals - Tax Implications for New Zealand Shareholders" Tax Information Bulletin Vol 17 No 2 (March 2005).
On 21 February 2005, HHG PLC ("HHG") shareholders voted to sell the Life Services business which formed part of HHG (now known as Henderson Group Plc) and return approximately GBP 875 million of the proceeds to shareholders and CDI ("CHESS depository interest") holders in exchange for the cancellation of shares. This process was done through two transactions, the Return of Cash and the Reduction of Investor Base.
On the basis of the information provided by Henderson Group Plc, including the HHG Shareholder Circular, and certain specific assumptions advised to HHG, the Commissioner now confirms the following about the HHG Capital Reduction.
Inland Revenue is satisfied that the cancellation amounts paid to CDI holders under the Return of Cash are not dividends for New Zealand tax purposes under section CD 3 of the Income Tax Act 2004, by virtue of section CD 14.
Inland Revenue also confirms that the cancellation amounts paid in respect of the second transaction (Reduction of Investor Base) to CDI holders whose total CDIs remaining after the Return of Cash were reduced by 15% or more are not dividends for New Zealand tax purposes under section CD 3, by virtue of section CD 14. However, for New Zealand CDI holders whose cancellation amounts represent less than 15% of their total CDIs remaining after the Return of Cash, the payment will constitute a dividend.