AMC.L Share Price (AMC)

The argument for the Crown was based to a large extent on what was said in this House in Inland Revenue Commissioners v. Reid's Trustees[1949] A.C.361. In that case a dividend in the form of cash was received from a South African company by a taxpayer in Scotland. It is clear from several of the speeches that this dividend was received as income. But its source was profit from appreciation of capital assets of the company.It was assumed, in the absence of evidence to the contrary, that the law of South Africa was the same as the law of England: so the dividend would be received in South Africa as income. But the taxpayer maintained that it was not taxable income, founding on the fact that a similar dividend paid by a British company would not be subject to income tax. This was held to be irrelevant: the dividend was income from a foreign possession and was therefore within Case V.

The issue with AMC is that it does not have realised profits in its balance to pay the special dividend out of it only has accumulated losses and if you look at their year end accounts for 2024 you will see that special dividend was debited (charged) to the accumulated losses reserve account thereby increasing the cumulative realised losses.

If AMC has not realised profits to pay the dividend out of then it must be the case that the special dividend was funded via the Share Capital account although a counter argument would be that it is being funded out of the net proceeds of the Irosta subsidiary consideration.

AGE

There is a 1963 tax case called Rae Lazard in which Lord Reid said "Under our law there is no doubt that every distribution of money or money's worth by an English company must be treated as income in the hands of the shareholders unless it is either a distribution in a liquidation, a repayment in respect of reduction of capital (or a payment out of a special premium account) or an issue of bonus shares (or it maybe bonus debentures).

He is also said:

In deciding whether a shareholder receives a distribution as capital or income our law goes by the form in which the distribution is made rather than by the substance of the transaction. Capital in the hands of the company becomes income in the hands of the shareholders if distributed as a dividend,while accumulated income in the hands of the company becomes capital in the hands of the shareholders if distributed in a liquidation.

For anyone interested in tax details there are two interesting tax cases re Alexander Beard who received £149,733,794 of dividends for the tax years 2011-2012 to 2015-2016 and the Upper Tribunal decision was issued on 22 March 2024 which is 12 years after the first tax year for which he received his first dividend.

The tax cases are:

Neutral Citation: [2024] UKUT 00073 (TCC)

Case Number: UT/2022/000084

UPPER TRIBUNAL

(Tax and Chancery Chamber)

and

FIRST-TIER TRIBUNAL

TAX CHAMBER

Appeal number: TC/2019 /09085

ALEXANDER BEARD

Appellant

-and-

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMS

Respondents

The Kings Counsel who represented the tax was of the opinion that a payment out of a share premium account is a return of capital and not income in the hand of the tax payer.

The Judges decision was that it the dividends are income in the hands of the tax payer .

As you can see this is a very complex area of tax law as Alexander Beard engaged a very well known Kings Counsel who gave him an opinion that the dividends are a return of capital and yet the Judges disagreed.

You can go onto the Bailli website and read both cases for free.

I am going to write to HMRC to obtain their opinion as to whether the special dividend is a return of capital or whether it is income in shareholders hands.

I suspect as it is not clear they will have an opinion that it is income in AMC shareholders hands as they collect money on behalf of the Government so it suits them to have an opinion that it is taxable.

Should HMRC be of the view that it is a return of capital then I will submit an error and mistake claim within the 4 year time limit so that HMR will amend my 2023 2024 self income tax return and they can then refund me the overpaid tax.

AGE

I have submitted my tax return on the basis that the special dividend is income in my hands and therefore subject to U.K.

dividends tax.

HMRC charge interest on unpaid or underpaid tax at the rate of 7.50% pa so should HMRC and a tax tribunal decide that the special dividend is not a return of capital and that it is in fact income in AMC shareholders hands then I will not have to pay any late payment interest as I paid the tax that is due by 31 January 2025.

As the former Board of AMC have left down AMC shareholders extremely badly as they failed to issue guidance on the tax implications of the payment of the special dividend they have left a large number of shareholders in the lurch.

They must have paid the solicitors who dealt with the disposal of Irosta many hundreds of thousands of pounds and yet shareholders have no tax guidance!

AGE