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Daily Telgraph:

Hilton warns investors of tax bill
By Christopher Hope (Filed: 06/02/2006)
Hilton Group is risking the wrath of shareholders by warning that the £3.3 billion sale of its hotels to America's Hilton Hotels Corporation could leave them with a big income tax bill.
The company's prospectus discloses on page 8 that “it is possible that any return of cash to shareholders will be in a form that would be taxed as income, rather than capital, in the hands of shareholders”.
While no final decision has been taken, Hilton company secretary Mike Noble warned in a private letter to shareholder James Farquhar that “it will be impossible to satisfy all shareholders' wishes”.
He added: “This decision will consider the best interests of the company and the shareholders as a whole. Inevitably there are different implications for the various categories of shareholders.”
Dr Farquhar, who lives in Ayrshire, said: “I am shocked that Hilton is so indifferent to the interests of shareholders that it proposes to return what amounts to our own money in a manner which will result in 40pc being in tax.
“I can see no reason why Hilton has chosen to pay out our money in a manner which provides the maximum sum to Gordon Brown to squander on his pet projects. Does Hilton wish to cause the maximum disadvantage to the shareholders who have supported it over many years?”
A Hilton spokesman said: “The capital structure review is still on-going. We will be able to talk more on February 23 at our preliminary results.”
Private investor groups claim such a tax bill can be avoided by offering alternative B shares or loans notes which can spread the bill. However, City advisers complain that these can be costly to administer and take-up can be low.
The Association of Private Client Investment Managers and Stockbrokers has already written to all FTSE 350 chairmen urging them to be mindful of tax bills arising from large transactions.
Angela Knight, chief executive, said: “It beggars belief we continue to have these things happen. The finger of blame has to be pointed at the advisers. Company chairmen are now aware of this problem.”
Alan Perryman, of the UK Shareholders Association, said the “most popular option” to mitigate capital gains tax was the strategy to issue B shares which could be redeemed at a specific time at the choice of the shareholder.

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