The Lemon Fool

Can anyone please confirm (or contradict) that when there is a special dividend accompanied by share consolidation, one has to declare the dividend in the year received but does not have to mention the consolidation on one's tax return until one disposes of the shares. I know I'm not the only one to be unsure about this but can't find any discussion about this on the tax board.

There will also be a slightly different situation when capital is returned via B shares, as with Aviva, which might usefully be covered on here for those holding outside ISAs. TIA.

Bouleversee wrote:Can anyone please confirm (or contradict) that when there is a special dividend accompanied by share consolidation, one has to declare the dividend in the year received but does not have to mention the consolidation on one's tax return until one disposes of the shares.

Once upon a time, Companies returning capital gave the holders a choice as to whether to receive the payment as capital or income. It was back in the days of George Osbourne as Chancellor that Companies were required to declare it as one or the other.

If a payment is declared as a dividend I don't think there are any CGT issue either now or in the future. Even if you now have 5 shares where previously there were 7, that has no effect on the historic amount you paid for them.

B share payments aren't taxed as dividends, but do have an impact on the CGT position.

Alaric wrote:

Bouleversee wrote:Can anyone please confirm (or contradict) that when there is a special dividend accompanied by share consolidation, one has to declare the dividend in the year received but does not have to mention the consolidation on one's tax return until one disposes of the shares.

Once upon a time, Companies returning capital gave the holders a choice as to whether to receive the payment as capital or income. It was back in the days of George Osbourne as Chancellor that Companies were required to declare it as one or the other.

If a payment is declared as a dividend I don't think there are any CGT issue either now or in the future. Even if you now have 5 shares where previously there were 7, that has no effect on the historic amount you paid for them.

B share payments aren't taxed as dividends, but do have an impact on the CGT position.

The company used to be able to give you a choice now if they do it is automatically treated as income. Most special dividends I've received recently, even those with share consolidations have been treated as income. An exception is todays Aviva special with consolidation which is via a B share scheme that the company have stated is to be treated as a return of capital and will be taxed under CGT rules. Now I've just got to see if Aviva provide a worked example of the tax calculation on their website.

daveh wrote:Now I've just got to see if Aviva provide a worked example of the tax calculation on their website.

What's supposed to happen is that they agree disposal and continuation facrors with HMRC such that

The gain equals Proceeds minus ( Original Purchase Cost multiplied by disposal facror)
The ongoing base cost is Original Purchase Cost mulitiplied by continuation factor

and
disposal factor plus continuation factor equals 100%