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Could anyone share some of their tax knowledge please.... my wife’s filling in her tax return and are we correct in thinking because the special dividend was a return of capital with a share consolidation, do HMRC need to be informed? as its not income and therefore not taxable.... Just our own money being returned. Tried in vain to contact HMRC about it and got cut off! Any thoughts please. Thanks.
Elgrebe, As I have already wriiten a few days ago, you may say that it is a return of capital and some would agree but that is not HMRC's view. If dividends from investments exceed £2k in a year the excess over £2k are taxable at 7.5% and you are obliged to declare them unless of course you have unused personal allowance as my wife does. It's simply not worth the risk because if at some future date an HMRC employee discovers it they can give you a nasty caning. I recall a case from when I was in practice of a farmer's wife who was doing calf rearing as a side line but not declaring it. In some mysterious manner they found out, took the case back 13 years then got their £11k tax and doubled it for a penalty.
Many thanks for the knowledge eccles that clarifies it.... it seems black and white from the tax-mans view then. Better to stump up the cash now than get a punitive bill later down the line. Thanks again.
https://www.gov.uk/government/publications/share-reorganisations-company-takeovers-and-capital-gains-tax-hs285-self-assessment-helpsheet/hs285-share-reorganisations-company-takeovers-and-capital-gains-tax-2018
Not sure if this helps, but may be useful generally.
If possible, this is why you want shares in an ISA, as nothing to declare then.
All thanks to a Board of Directors and their city chums doing a complicated share consolidation alongside a Special Dividend that effectively cancelled each other out so no share holder benefit except for those who it was actually a tax liability and thereby incurring a loss. The net effect was a return of capital but it wasn't that it was a Special Dividend so taxable if not held in the type of investment wrapper such as a SIPP or an ISA. HMRC are going to follow the rules not make a one off judgement and say hey those poor TSCO holder's didn't actually benefit or will actually be penalised.
Rules is rules and the BoD chose to do this, for whatever mind boggling reason.( I can only think due to some benefit to the BoD.)
Hey they apparently didn't even clear the pension deficit and they have half the market capital in debt liabities.
But hey ho theu did a return of capita via a share consolidation and a special dividend because they couldn;t find any other use for the money...like clearing the pension deficit in full and paying down debt....
What was the incentive to do this for the Board ? Are we back to the bad old days now Gorgeous Dave has scarpered ?
You would have been better off selling before the ex div date and buying back in and if you'd left it you'd have had more shares than you started with with where the SP has gone. At these levels on a consolidated free float this SP is the equivalent of well sub 2 quid 1.70/1.80 based on the pre consolidation. A debt laden company still with a pension deficit that wil likely grow. A repaid rates rebate on top of increased costs of covid of nearly a billion. The online not being so majorly in demand now we are coming out of the woods, so i guess that's going to need trimming to find it's optimum level.
Way to go BoD ..way to go...
I have said before without all these shennigans you'd all be the proud owners of a debt free company with a SP way above 300p.
Spindler, you just don't get it. You don't run a business like you run your home. Pension costs were reduced using some of the capital from the recent sales. Paying down debt would have been a stupid strategy in an era of all time low rates (which TSCO have re negotiated)which they can continue to offset tax liabilities.
Yes i do get it we have been here before. Low rates are the root cause of all the problems currently..oh debt is cheap let's load up is total baloney. Intel admitted yesterday they are years behind in technology...been doing buybacks since 2011 for the benefit of directors not investing in the health and future of the business, they are not alone.
The debt obligations are half the market cap...the pension deficit was not completely cleared.
It was called a special dividend(SD) ..IT WAS A SD in NAME ONLY because of the Consolidation.
The SP shows me to be correct this is a lame SP because of the fundamentals. And the fundamentals could have been different.
And one thing that slime Phillip Green was absolutely correct on low rates cause the pension deficits so a smart board would make sure that problem permanently goes away. If Tesco had cleared it and most of it;s debt...it could have borrowed more in the future to expunge future deficits or to make acquisitions...heck to do booker again they wouldhave to grow the debt !
They should never have done the SD and consolidation period
All....Thanks for the info and opinions. What is it they say about death and taxes...the only certainties in life?
Cannot stress enough the importance of a stocks and shares Isa