A&L investors have four weeks to sell

Shareholders in Alliance & Leicester are running out of time to sell their stock and avoid additional tax and paperwork.

With the takeover of the bank by Santander Central Hispano set to be approved at an extraordinary general meeting on Tuesday, shareholders have until 10 October to sell their A&L stock. After this date, they'll have their A&L shares replaced with Santander shares, which are listed on the Spanish Stock Exchange and quoted in euros. They will then be liable to pay Spanish tax.

Gavin Oldham, chief executive of The Share Centre, says: "The 500,000-plus Alliance & Leicester shareholders have two options if, as expected, the bid from Santander is approved next week; sell, or face complicated tax arrangements."

While there is little investors can do to stop the takeover, they do have until Friday 10 October to sell their shares. There's no cash alternative for the takeover.

Shareholders who hold on to their A&L shares after 10 October will be forced to pay an 18 per cent charge on any dividends they earn from their Santander shares, and these can only count towards a UK tax bill if a special Spanish tax form is filled out. A full tax return must also be sent to HM Revenue and Customs, while failure to file the Spanish tax paperwork within a month of selling the shares could result in a €100 (£80) fine. Abbey Sharedealing, which is owned by Santander, offers help and advice on this process.

Oldham adds: "Investors who opt to sell but who would like to reinvest in an alternative UK bank could look at HSBC or Barclays, both of whom The Share Centre currently hold as medium-risk shares."

A&L has a large number of small shareholders as it was a former building society, whose shares were distributed to its customers when it demutualised in April 1997. Customers were given 250 shares worth £1,332 at the time. However, after the torrid conditions of the past year, the same number of shares is now worth just £741. Nevertheless, 250 shares would have paid out total dividends of £1,182 over the past 11-and-a-half years, ensuring that those who have held on to their holding are almost £600 better off in nominal terms than they would have been if they'd sold their holding at the time of demutualisation.

Having hit a peak of almost £13 a share back in May 2006 – amid rumours that the French bank Crédit Lyonnais was on the verge of making a bid – A&L eventually sold to Santander for about £3 a share.

For more information on the takeover, visit Alliance & Leicester's website www.alliance-leicester.co.uk. For more information on buying and selling Santander shares, visit the site www.santandershareholder.co.uk.