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We have already rejected HMRC’s submission that the capital/income split shown on the documentation was not in accordance with Delaware law. We also reject their later submission that treatment of the dividend in the overseas jurisdiction is irrelevant to its classification for UK tax purposes: that submission is entirely inconsistent with the ratios of Nationwide and Lazard. The citation on which Mrs Donnelly and Ms O’Reilly relied (see ¶123.) does not assist. It says (emphasis added):
“if a foreign company chooses to distribute its surplus profits as dividend, the nature and origin of those profits do not and cannot be made to affect the quality of the receipt for the purposes of Income Tax.”
132. In this case, DPSG’s profits were exhausted in payment of the income part of the dividend; the balance did not come from “surplus profits”
Interestingly enough the Corpus test was discussed in the Buckingham V HMRC case but it did not go into detail.
With AMC's special dividend there are no retained profits to pay the dividend out of which indicates it is a return of capita l but on the other hand when applying the Corpus test we will have the same number and class of shares as we had before the payment of the dividend which indicates it is income in the hands of shareholders.
As I posted before it is a difficult task deciding if the special dividend is income in the hands of shareholders or a return of capital.
AGE
n depth.
AGE
Gazzleberry a First Tier Tribunal tax case called John Buckingham V HMRC was decided on 4 April 2023 and it is of relevance to AMC'S special dividend.
An extract from the case below:
HMRC received information under the Foreign Account Tax Compliance Act (“FATCA”) which included the income part of the Special Dividend paid to Mr Buckingham.
HMRC purported to open an enquiry into his SA return under Taxes Management Act 1970 (“TMA”), s 9A. The case officer was Mr Robbie Butler. He considered the facts and the relevant law as well as consulting HMRC’s manual and an internal specialist. Having done so, he decided $29.50 of the Special Dividend was taxable as a distribution under UK law and
that the balance of $74.25 was capital.
On behalf of Mr Buckingham, Ms McSweeney said that DPSG and KPD were both incorporated under Delaware law, and in accordance with that law, the Special Dividend had been split as between income of $29.50 and capital of $74.25. She relied in particular on the following points, which to avoid repetition we have where relevant cross-referenced to our
earlier findings of fact:
(1) It is clear from Form 8937 that:
(a) the dividend portion was paid out of “earnings and profits”;
(b) there were insufficient earnings and profits to fund the capital portion, see ¶20 and ¶31.; and therefore
(c) the balance of the Special Dividend could not be a income payment because there was no income in the company to fund it.
As this is a First Tier Tribunal case it is not binding on other cases that are brought in respect of whether a special dividend is income in the hands of shareholders or whether it is a return of capital.
Looking at AMC's latest set of accounts which are for the 6 months ending 30 June 2022 you will see it has net assets of 36.993m USD and accumulated losses of 39.467m USD so there are no profits for the dividend to be paid out of so it is being paid out of capital.
It would have been ideal if the Buckingham case had been for a BVI Company rather than a US Company as then the facts would have been almost the same as for the payment of AMC's special dividend.
AGE
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AGE
It doesn't matter what you think, what I think, what a chap from Eton thinks, what AMC says. The only one that matters is HMRC. Don't Google, look for special dividend on the .gov web site, you won't find it. It is a dividend.
530 posts over 41 days
No Analyst info ( D ) since the leap up of 63% to 1.6p on 6/3/23 the share later topped out at 1.7 on 21/3/22.
Since then been up and down within the 4% spread resistance on the downside @ 1.66p
You'll get 1.6ish for those shares now, if you wait you'll get 1.8p. Not much difference but if you wait you'll get your 500 quid plus you'll still have your shares, whatever they may be worth.
I think that's right, if not, call me gaz!
Am I thinking right or confused?
If I’ve got a few quid profit in the blue here (only about £500) should I sell that amount of shares to top slice or just sit tight for Div payments- may sound like a stupid question but I’ve met myself coming back trying to work it out ??
Dont forget if you are not in an isa there is still a 6k capital tax allowance for 2023 /24
assuming amc is not in isa or pension
say aveage is 12p
if dividend is a true dividend you will pay tax on this .. even though you have lost not gained.
It could be a dividend deemed as capital return, which acually it is.
Is there anyting in writng supporting capital return
It did occur to me that they may be delaying the divi payment in order to get their next venture in place in the hope that their jam tomorrow spiel prevents a mass exodus from the share on the ex-divi date
GB,
You may be right, my timeline was based on a Google search which I appreciate is not the most reliable.
https://uk.news.yahoo.com/3-companies-shelling-special-dividends-194907379.html
Based on what you have said, 5 weeks is more reasonable. Therefore, potentially the latest ex-divi date is 8th May?
Guess we will find out soon enough.
AMC cash shell = 6th March = rns 14 March 2023
AMC received cash = 14 March
Based on the above
EVENT | DATES | NOTES
----------------------------------------------------------------------------------------------------------
Divide payment of 1.8p | 14/03/23 to 12/06/23 | 90 days payment of divi from when AMC receive cash.
Suspension from trading | 06/03/23 to 06/08/23 | If no completion of RTO within 6 months of AMC becoming a cash shell (notwithstanding AIM rule 8).
Delisting- remaining monies paid to shareholders | 06/08/23 to 06/01/24 | further 6 months from the suspension of trading If no completion of RTO (notwithstanding AIM rule 8).
IF AMC is planning to use the full 90-day payment period for the divi, IMO announcement of the ex-divi date will be 10 to 14 days.... ish before the deadline so around the end of May, the beginning of June. (10 to 14 days based on other companies' ex divi date and payment timelines).
1.8p dividend and about 0.50p in cash shell. 2.3 pence total value. No brainer.
‘Just’ the 66 tomorrow then
Just 67 days to go till the payment of the 1.80 pence special dividend assuming the Board take a maximum 90 days from the date of receipt of the 35m USD which was the 14 March 2023!
bori550
Guess I am holding off counting my chickens until I can count the money in my pocket!!
If he would have meant 90 working days he would have stated 90 working days!
AGE
I don't think you can put out an rns saying you are paying a divi and then don't as it was the main reason for selling the company .
Personally, the delay suits me, when I can I will keep adding, anything below 1.7pence is a bonus. Yep, still a chance that the div may not be paid out, but the risk is less than what it was.
It wouldn't surprise me if we don't get the money by 12 June, or whatever the cut off is and Robin comes back saying he meant 90 working days......
Don’t worry Geng ……. RY & Co will have that well and truly sorted already.
OTL
I bet the delay is because Robbing is still trying to work out how he can get a bigger chunk of that $35Mil out for himself in some way!
Once the cash is paid out his gravy train will be under much more scrutiny with any new venture.
I did a calculation and assuming we received a net 34.7m USD as AMC’s solicitors will deduct the balance of their fees from the 35m USD then on the basis the USD deposit interest rate is 3.50% then AMC will receive 207,480 Pounds equivalent if the monies were left on deposit the day after they were received.
The interest earned assuming the monies are kept on deposit until the 31 May 2023 equates to just 0.01 pence on the share price.
Sterling has appreciated against the USD and when AMC received the monies the fx rate was 1.2159 and today it is 1.2493 so the USD has depreciated by 2.75% which is a faster annualised rate than the USD deposit interest rate.
AGE
JulianM you make valid comments re the RNS dated the 3 October 2022 as it stated:
“With the key approvals now in hand, we shall complete our assessment of the classification of the dividend regarding shareholder taxation”
It is now the 4 April 2023 so six months have gone by since they issued the RNS.
AMC’s Solicitors will seek an opinion from a tax barrister as to whether the special dividend is income in the hands of shareholders and hence subject to U.K. dividends tax or whether it is a return of capital.
What we have to remember is that if he forms an opinion that it is a return of capital without having a precedent then HMRC are going to challenge it as they will be of the opinion that it is income in the hands of shareholders as it is described as a special dividend and dividends are income receipts in the hands of shareholders.
In the First Nationwide v HMRC, HMRC argued that the payment of dividends out of a share premium account was not income in the hands of shareholders but it was a return of capital because Nationwide had claimed a 51m deduction for expenses of management.
If the Judges found in favour of HMRC that the dividends were a return of capital and not income then HMRC would win the case and Nationwide would end up paying more tax.
The Judges found in favour of Nationwide.
In this case it was favourable to HMRC to contend that it was a return of capital but with AMC’s special dividend it will be in HMRC’s favour to contend that it is income in our hands as they will want us to pay dividends tax on 25.8m pounds worth of dividends.
I can not find any legal cases to use as a precedent where a BVI Company paid a special dividend when it does not have any realised profits to pay the dividend out of.
There are two issues with the payment of the dividend which are is the payment legal and is it a return of capital.
As it is a BVI Company it is legal but if it were an English Company it would be illegal as it does not have sufficient distributable reserves to pay it.
I think the safest solution would be for the Board to structure the 1.80 pence as a return of capital rather than a special dividend if there is no precedent that states it is a return of capital as HMRC will challenge this and state it is income in the hands of shareholders.
If there is no certainty that the special dividend is a return of capital then shareholders would have to pay the costs for a tax tribunal which could take years to resolve.
Let’s see what the Board decide to do.
AGE
Agneiss-I agree that making appropriate arrangements takes a little time but as long ago as the 2nd October RNS when we were advised that The Russian Federation approved the deal they knew that they had the green light and could commence work on the mechanics of the issue of the dividend.So they have had 6 months to prepare and if they had the best interests of their shareholders in mind ,by paying the dividend asap,they would have been geared up to proceed as soon as the funds arrived,which was at least three weeks ago.So I am not impressed
Geng I had a look at the General Meeting paperwork re the sale and there was only one resolution which was to authorise the sale
There was no resolution for shareholders to vote on to approve the payment of the special dividend.
I did a bit of research and I found that for a U.K. Company the shareholders do not have to approve an interim dividend but they do have to approve the payment of a final dividend.
For a BVI Company there is no requirement for the shareholders to approve a final dividend it only needs the Directors to approve by resolution.
Hopefully if the Board receive advice that the special dividend is income in the hands of shareholders so subject to U.K. dividends tax that they will structure the payment of 1.80 pence via a different method than a special dividend so we do not have to pay U.K. dividends tax.
All of the above takes a considerable amount of time to organise so I think we will not hear anything from the Board until this is all organised!
AGE
Now 1.675 it's increasing by around 0.01P per day was 1.665 Friday and so on.
Slowly wring out the impatient!