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how the proceeds from the sale of an asset can be classed as income.
Just imagine investing £10,000 in a company and then a couple of weeks later the company sell 50% of their assets which they then return to shareholders. You would be getting back £5,000 of the capital that you have just invested. How could this possibly be classed as income for tax purposes.
I will be classing the return of money from the Asia asset sale as a return of some of my capital that I purchased Tesco assets with in the first place.
Tesco made the sale not you. Tesco will treat it as a business disposal for tax purposes. You are an investor. You should treat it as dividend income as that is what it is. Do what ever you fancy on your tax return. Good luck if you get caught, but I'd take advice, sounds like tax evasion to me. If you haven't made use of Isa wrappers then do so. If you have, well you are probably sufficiently wealthy, probably not worth the risk of engaging in tax evasion.
I believe it comes down to how the company categorises it. If they are conducting a return of capital this is different to a dividend. if it's called a dividend, it's a dividend and should be treated as..... you guessed it....
Just my simple take on it. Not an accountant, or tax advisor.
Many companies will issue special dividends, some almost yearly. These are treated as ordinary dividends. With the sale of the Asia businesses, there are two elements. The first is the return of the asset value and the second is the profit made on the sale. One is simply a return of your original money (asset value), the second is the balance (the profit).
I have looked at the circular but can't remember seeing anything about tax implications. I would certainly expect the profit element to be subject to tax. I have surfed the web extensively and can't find anything UK based which is sensible, not even on HMRC web site. I have also written to various TSCO Directors regarding this.
gg
''You should treat it as dividend income as that is what it is. ''
As well as an income dividend, capital can be returned via a special dividend (capital dividend)
https://www.lse.co.uk/rns/VEC/proposed-special-dividend-and-share-consolidation-32t2rnpzj72zh3o.html
Anyone thinking of purchasing £240,000 pounds worth of Tesco shares tomorrow so that you can shortly get back £50,000 of your capital, or would you be looking forward to £50,000 income.
Either way, invest 240k and 50k is coming back to you so not sure what your point is here?
I can't get my head round how a capital repayment would work. I assume the capital isn't coming out of retained earnings or its a normal dividend. So that leaves share account and share premium, which is less than 6bn in total, so no way they'd return 5bn through this.
Is there a tax accountant around?
reduction in share capital
Sale of Thailand and Malaysia businesses approved by shareholders in May, regulatory approval and completion of sale expected in 2H 2020; to be followed immediately by shareholder meeting to approve the return of capital
https://www.tescoplc.com/news/2020/interim-results-202021/
gg
''so not sure what your point is here?''
The difference between a capital gain/loss or income tax to be paid
Indeed it does say "return of capital"
Well, I'm interested to see how it works. Although my Tesco is in an Isa so it doesn't matter either way.
One thing for sure . The UK tax system will be very different very soon. To some degree I do see it as a return of capital rather than a special dividend. The sale of the Asia businesses was not for profit but to cut losses and contradicts the definition of a dividend.
Anyway no point in losing any sleep. Always sell if it did.
£8m trade today at just above the bud. 2.4206, reported as a sell. Do me a favour, even with liquidity you wouldn’t be able to negotiate that price for that volume:)
Thanks longterminvestor. The tax situation certainly is a worry as effectively some of us could be worse off? Will have to wait and see exactly what happens? The reduction is share numbers after the consolidation will help with future dividends?