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As I have said before, TSCO should have defined it as exactly what it is, namely "Capital Return" and not Dividend. This would have avoided any tax implications.
Also don`t forget there is also an additional "stamp duty" tax to pay when you buy back shares with your dividend of 0.5%.
So this "deal" seems to get better and better by the minute (sarc).... and we are paying additional taxes for no reason at all.
Effectively this is a bureaucratic nuisance which for those outside sipp/isa forces a tax/CGT event.
I cannot see the point, which they have not explained and I'm amazed in a world competing against Lidl/Aldi/Amazon/Ocado they can't find a better use for the cash. It feels like a lazy board to me.
I was holding Tescos in my SIPP and ISA, I am not going to be any better off after the payment, It isn't free money, The number of shares will be reduced in order to maintain a high SP and i would need to reinvest that money to get my holding of shares back, Its all a con.
I have sold my Teco shares in my isa incase the SP drops of the the EX Div date when people will have got the dividend and i might buy in on any drops but i am holding the tesco shares in my SIPP.. Either way, Its 50/50 bet
Might make sense for those holding outside an ISA/sipp to sell now and buy back after the consolidation. This would avoid a divi tax but you may have a capital gain to deal with. If your gain is less than £12k allowance and you are not using this for something else then doing this might make sense.
SIPP is tax free, i've recently had that answered by HL. Drawdown pots are also free I believe, until you start to draw income from them which will be at your rate, eg 20/40/45% .
The net of this is we will have to pay tax at 7.5% or 28% (lower or higher rate taxpayer)on the dividend above £2,000 (don't forget to add in other dividends received in the fy). So outside of ISA/SIPP we have an immediate tax liability however, if you sell your holding after the consolidation then effectively you originally paid more per share so your CGT is less if you are above the yearly limit , £12,300 I believe?
BE WARNED - Ricci is probably going to hammer us all in the budget so I'm expecting dividend tax to rise in line with income tax and CGT to be reduced substantially. The income tax increase won't affect us as the divi is in fy 20/21 tax year but the CGT change will probably affect most of us outside ISA/SIPP envelopes.
Hi Rosewall
Apologies for hijacking your thread, but your question caused me to look at the issue of paying tax on SIPP covered dividends. The following is from expertpensionclaims.co.uk but similar answers came from other sources also.
"4. Are SIPP dividends tax-free?
SIPP dividends are tax-free. For whichever investments enable paid dividends, the income tax paid will be reclaimed by your provider and then returned to your account. "
I hope this helps.
If they had paid down debt or bought back shares to reduce the free float I think this would have had legs towards or beyond 300p. Can't see that now until after the dust settles. Why the need to make it complicated ? I personally do not like consolidations, if you want to reduce shares in the market buy them back(especially when you have billions sitting there doing nothing), don't reduce my holding in the hope the market revalues them positively. I get you still have the same slice of the pie before but that cuts no ice with me !
The more I read the more I am convinced that it is decoy div rather than special div. It is capital distribution. If you acquire TSCO shares today your cost will remain same after taking into account the so called special div. I do not understand why FT calls it bonanza and why investors are rushing to buy the TSCO shares. On 14 Apr 21 final result will be out together with final div, which may be hyped.
Quel
You imply that there are tax benefits from holding dividend producing shares in an ISA or SIPP. I was on the gov.uk web site and noticed this page "https://www.gov.uk/tax-on-dividends". It mentions ISAs but not SIPP. I had a brief look at the Personal Pension pages on the gov.uk site but can't see anything. Is the dividend tax free in a SIPP (I thought it was but can't confirm that).
fwiw, I think the sp is being held back on the run up to the GM and then once consolidation occurs the instructions that are are not wanting the tax headache will buy in heavily lifting the price closer to £3.
Normally wrong but just my thoughts.
Institutions ...
Yes that's the conclusion I came to. And worse off if you hold outside an ISA or sipp. Can't understand why the FT call it a bonanza. Not for PIs, possibly for instructions but no idea on that one.
correct
so the way i read this i am no better off
Only if the share price in general increases the same as any other trading day.
so the way i read this i am no better off
the shares you own will consolidate so It is too good to be true, the dividend is wiped out. Because for every 19 shares you own they will change them to 15 when consolidated. And even worse if you have used your £2000 tax free dividend allowance for the year you will pay tax on the dividend that you get.
Surely this seems to good to be true.
S/P 250p for rounding sakes..
If I hold 1000 shares
I will get £500 pounds for free and 1000 shares.
Where is the catch??
quelfromage1, Thanks for that info.
Whoops I'll get that one deleted
robleo, rather than "not true" (I misread your question) "no", no tax to pay in a SIPP
quelfromage1 not subscribed to the ft
Many thanks for the reply. I'll keep a look out for mine.
robleio
Not true I think see:
https://www.ft.com/content/97bf7a43-81a4-46ff-b4a9-5bfe4c7773b3
Well obviously if held in an ISA or SIPP as I do there is no divi tax. But even then it seems to me of no benefit whatsoever.
I can buy back the 4/19 shares that have been taken away with the 50p per share I'm given then I'm roughly back where I was before all this messing about? Or am I missing something here?