AA sale windfall will be taxed

MORE THAN 500,000 AA members are likely to be taxed on any windfall they receive from its pounds 1.1bn sale to Centrica, the gas supply company.

Cash payouts of about pounds 240 will be made to 4.5 million members of the motoring organisation if the deal goes through.

But unlike other demutualisations, members who pay the 40 per cent higher tax rate on their earnings will see their windfalls taxed. The charge could cut the payouts from pounds 240 to pounds 180 for members who earn more than pounds 32,335 a year.

Maurice Fitzpatrick, a partner at accountants Chantrey Vellacott, said: "Approximately 10 per cent of workers in the UK pay the higher rate of tax.

"However I would estimate there are a higher number of AA members in that tax bracket than the national average and would think at least half a million of its members will be affected by this charge."

The Inland Revenue has decided the payments count as a special dividend payment which is taxable on high earners. Windfalls from building society demutualisations such as the Abbey National and Bristol & West were classed as capital gains. The first pounds 7,100 of capital gains each year are tax free.