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Beautifully put , or as I have said , not all the sharks are in the sea. Halved our share price and got away with it .
LTI is right... it is a return of capital . so here is the solution for both Income and Capital holders :...
TSCO can issue B shares at a value of say 50p and the rump of the existing share , call them A shares for the valuation at the split (say 190p).
this is a tax neutral event so nothing happens except that now you hold two shares
choice 1: Now the shareholder with a preference for Capital can elect to hold both the A and the B shares for the long term. in effect it means that things tick along as usual.
choice 2: the shareholder who wants to cash in the B shares will make a disposal as and when he needs the income. Until (s)he sells that B share, there is NO disposal and no income tax payable on the dividend until the shareholder actually sells the B shares into the market.
it couldn't be easier - but no doubt TSCO BoD will be itching to pay legal heads hundreds of thousands for this bit of Room 101 taxation information. what strikes me is this company loves to fritter their shareholders money away - right back to Leahy's shenanigans and drastic Dave single handedly halving the share price. Did any of them serve a day in prison for an alleged crime or did any of them pay a penny in a fine from their own pockets ?
?
Appears that the results were broadly in line with what the market was expecting. I'm struggling to see the benefit to hold the shares over a short time horizon now. Logically sales would dip as we come out of the pandemic, more people have moved online which is poorer margin, potential issues with transportation of perishable goods due to brexit, upward pressure on wages (morrsions announcement) and longer term amazon lurking on the sidelines, pension scheme liabilities, potential losses with the bank - struggling to see the positives.....anyone??
Rosewall
Tesco still do have a commercial tie up with Carrefour - it's a growth area for both business built around consolidation
I believe are returning capital from a sale, and therefore it should not be taxed as income.
Dadean
Tesco now sell cakes with files in them. You can take one when you visit Gavster inside :-)
I’ve purchased recently because of the Special Dividend coming up, but also because I personally feel British Supermarkets in the next few years will be positive. If the SP drops after the SD I will purchase more. I personally feel it’s a win win. All my opinion of course.
Usual large reported trades. Again impossible to say whether or not they were buys or sells as we don’t know the time they were executed. 2 large ones at intra day lows and several at the days highs.
We are mere spectators. :)
Gavster just don't include it in your divs received calculations! Or reinvest it immediately, they returned it to you, you returned it to the market, same capital invested.... Not tax advice, just for fun
The Vodafone sale of Verizone may have had some technicalities which were different but I`m not sure of all of them except with the Verizone deal shareholders were also given some shares in Verizone and perhaps that is the reason why Vodafone could call it a "Capital payment / Return" instead of Dividend. !
Anyway I`m sure its too late to change this now and I don`t think, little old me writing to TSCO will change anything since they have far cleverer people to advise them and if they could have done a "Capital return" I`m sure they would have. But "food for thought" for future sales.
@ leas think you have got it exactly right with the algo trades. Summed everything up.
Lurker
MRW fell on the day of its results and it traded positive afterwards. Their results equally as good. Online trading with TSCO is increasing and not struggling to meet capacity as much as the other big 3.
My guess is a lot of pi’s were expecting a significant gain today despite it trading above 230p. I would guess that some have sold today hence the neutral sp reaction.
Tbh, with all these algo trades the price at the moment can be taken in any direction that suits institutional investors.
This is a sound company with little risk.
As fir the bank, like SBRY someone would be happy to buy if that is a solution to minimising the company’s exposure to the banking sector woes.
Well, in my view that was a great trading period for Tesco. I can't help but think that the reduction in sales from Tesco Bank have had an impact on today's news, and resulted in the small drop - or maybe even stopped it from rising? Or am I missing something here?
What's the difference between the Vodafone sale and this Tesco sale in allowing Vodafone to call it a Capital Return, and Tesco not being able to. If there is no legal difference, then it doesn't what HMRC's opinion is.
jaffjoon,
Honestly, given Tesco's track record, do you honestly think that HMRC will let that one pass?
Dadean
There will always be the exception to the rule but I can assure you that the vast bulk are genuine. My own local store had to send 40 colleagues home to self isolate. The colleagues have done brilliantly well and have stepped up to the plate.
That's my way of thinking Gavster. Though I'm still trying to decide whether to just let it automatically reinvest under DRIP or take as cash and reinvest at my time of choosing when things settle (in case the boys on the market cause the SP to temporarily inflate, knowing that bulk reinvestment purchases will be happening at the same time under DRIP)
IMO, this will show a much better return when the special dividend is reinvested, as the drop in dividend will be compensated for with the extra holding, so increasing my yield above the market.
jaffjoon
It's a worthy question. have you emailed the company ? If you do, please share any answer back from investor relations or better if find the CEO's email or secretary with a search engine.
Just read they have 30,000 staff off sick or isolating at the moment, huge number, wonder how much of that is genuine sickness... Apologies for scepticism
Reply to Percyvrance`s question regarding what happened when Vodafone sold Verizon in Feb 2014.
I have finally found the details through my records and they were as follows:
" For every Vodafone share held at close of business on 21 Feb 2014, shareholders have received 0.0263001 Verizone shares and will also receive US$0.4928. Vodafone has also completed a share consolidation and shareholders have received 6 new Vodafone shares in place of every 11 Vodafone shares previously held"
The US$0.4928 per share was also "defined" / called a "Capital Payment" and NOT a dividend so one did not have to log it as a dividend and no taxation due.!!! Which brings me back to my questions this morning: Why can`t TSCO define the 51p as "Capital return / payment" ?
Responses appreciated.
Thanks.
If it walks like a duck, quacks like a duck then it is a duck.
Gavster; Thanks for the analysis. I have one important question which may change things as follows:
I assume TSCO can re-name / define the Special dividend and call it "Return of Capital" since I think they mentioned this word before. If it could be defined as "Return of Capital" (which it really is by definition), then surely for those investors subject to taxation, there would be no tax to pay since its not a dividend ?
Please advise where (if at all) I have gone wrong on the above.
Thanks
Hi Leas,
Back in the late 80's probably, from memory, did Sainsbury and Carrefour not have a joint venture in their Calais store? Also, Tesco had a working relationship with Carrefour too just a few years ago.