The small investors are facing a dilemma over their holdings, as deadline day approaches.
Small shareholders at Alliance & Leicester (A&L) are facing an investment dilemma, thanks to the mortgage lender's proposed takeover by larger rivals Santander.
Letters have been sent out to the group by the firm, which also owns Abbey in the UK, setting out their options before the deadline on October 10th. Shareholders can either sell up, or exchange for Santander stock at a ratio of 83 shares for every 250 of A&L's.
However, this situation is complicated by the dealing costs of the swap, which mainly stem from the fact that Santander is listed in Spain. Not only do the investors have to contend with shifting foreign exchange rates determining the Spanish firm's value in sterling, but they are also tied to HM Revenue & Customs rules over foreign share dividends.
Shareholders in foreign firms are allowed to treat the shares in the same way as their UK equivalents if, and only if, total annual dividends from them come to less than £300. If that limit is exceeded, however, they must put the gains on self-assessment tax forms, the Guardian reports.
Commenting on the situation to the newspaper, chief executive at The Share Centre Gavin Oldham said: "There is little investors can do to stop the takeover. But if they hold on to the shares and exchange them for Santander they will have complex tax arrangements on dividends and any eventual sale."
He added that investors who want to keep their money in the UK should sell A&L and buy HSBC or Barclays - both banks with HQs in London.
A&L has an estimated 500,000 small shareholders in the UK.
