The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Just noticed there was some spelling mistakes in my last post eg there instead of their
AGE
Gwm121 if you look at the consolidated statement of changes in equity on page 7 of the interim accounts you will see that the dividends declared of 31.284m USD are included in the column called accumulated deficit.
As I have explained before if AMC was a U.K. domiciled Company rather than a BVI domiciled company then under English Law it would be illegal for it to pay the special dividend.
Under BVI law it is allowed to pay the special dividend as long as it meets the BVI solvency requirements.
The charging of the dividends declared is an accounting entry however from a law perspective the special dividend is a return of capital.
HMRC may try and argue that if it is a return of capital then the special dividend should have been shown in the Share Capital Company column so that it is reduced by the 31.284m USD to then net down to 49.510m USD.
This argument is not valid because it is obvious to see that if there is a brought forward accumulated deficit of 40.529m USD then it is not possible to pay the special dividend out of the loss.
The service simplest way to demonstrate the principle above is that if you have 10 apples and you want to give someone 20 apples or 10 apples and 10 oranges then you can only give them 10 apples out of your holding of 10 apples you cannot possibly give them 20 apples irrespective of the fact there was a an accounting entry which shows that you have given them 20 apples.
Therefore if you want to give someone either 20 apples or 10 apples and 10 oranges and you only have 10 apples and 10 oranges you would have to give them 10 apples and 10 oranges despite what the accounting entries show that you gave.
Now apply the principle above and replace the share capital with oranges and the apples with accumulated losses and you can clearly see that if it was possible to have negative 10 apples you would not be able to give them 10 apples as you have none to give them.
Obviously it is not possible to have a negative amount of apples to start of with.
Obviously if HMRC try to run the argument that the payment of the special dividend is not a return call fof capital because there is an accounting entry in n the accumulated deficit then it will prove that they do not know there apples from their oranges!
AGE
Does anyone have an eye for detail nowadays as there are no headings on any of the primary statements being statement of comprehensive income, balance sheet, cash flow statement etc.
The annoying thing is that the Board are being well paid for a part time job and they obviously have not read what has been issued in the RNS.
You do not need to be an accounting expert to notice issues like these you just need an eye for detail.
AGE
The cash flow statement for the 6 months to 30 June 2023 includes payments to suppliers and staff of 9,132,000 USD!
I wonder what this is comprised of as it is 2.72 times the amount in the year ended 31 December 2022 and 6.37 times the amount in the 6 months to 30 June 2022.
We received 35m USD gross yet paid out 9.142m USD for costs which is a ridiculously high amount of money!
AGE
He has earned 865 USD for today for not doing much by the look of it!
AGE
Well RY finally spring into action and did some work by issuing an RNS to say AMC has been suspended and that the Board had 6 months in which to organise an RTO and they failed to do so!
AGE
At least the Board have one good quality which is that they are consistent in their inability to create value for shareholders and they leave everything to the last moment!
AGE
A special cannot be paid as there are insufficient distributable reserves to to so as there is an accumulated loss in the P&L reserve of 34.037m in the SCIR Company balance sheet.
AGE
Are the Board just twiddling their thumbs while collecting their remuneration every month.
There does not seem to be an urgency on their part.
About time they were put out to pasture!
AGE
Gwm121 selling your AMC shares now is not going to resolve your problem as you have already received your special dividend.
HMRC can say what ever they want but in that case we will appeal their decision if they are of the opinion that all of the special dividend is subject to income tax and then take the case to a tax tribunal.
AGE
Gwm121 have a look at the tax case called HMRC v First Nationwide in which the judges decided that the payment of a dividend out of a share premium account was income in the hands of shareholders and that is was the payment of a foreign dividend.
Look at AMC’s last interim accounts which are for the six months ending 30 June 2022 and on page 4 you will see a consolidated balance sheet which shied share capital payment will of 80.794m and a share premium account of 4.278m.
Based upon the decision in the First Nationwide case then if AMC’s dividend is being partially funded by the share premium account with the balance being funded by the share capital account then 4.278/ (4.278 + 80.794) x the total value of the dividend will be considered to be income in the hands of AMC shareholders with the remainder being a return of capital.
If the 4.278m is eliminated by the accumulated losses then of 39.467m then all of the special dividend is being by the share capital account hence it is all a return of capital.
When calculating distributable reserves you have to look at AMC PLC’s balance sheet rather than AMC Group balance sheet however the share capital and share premium are exactly the same in both the Company and the Group balance sheets!
AGE
A U.K. Company is not allowed to pay a dividend unless it had sufficient accumulated profits to be able to pay the dividend out of.
You are forgetting that AMC is a British Virgin Islands domiciled Company and hence there is no restriction in paying a dividend if the company had not made a profit apart from the BVI solvency rules which means that once it has paid out the dividend it still has sufficient cash to be able to pay all of its liabilities.
AMC is on the AIM market but that does not make it a U.K. Company!
AGE
Hi gwm,
The Company called it a special dividend which is a dividend other than an ordinary dividend which is normally paid each year by profitable Companies.
A special dividend is not paid every year which is why it has the word special.
I agree with you that we should all submit the same wording.
You can call it a dividend but what it actually is has to be determined by the facts.
A number of people have posted that it is a return of capital because an asset was sold but they have not done sufficient research as if they had done so they would have found out that the fact AMC sold shares in a company which owned the mining licence does not make it a return of capital.
What is capital in one persons hands does not make it capital in someone else’s hand.
For instance if a building company builds a number of houses then when they sell one of them then the profit will be a profit from trade and the company will have to pay corporation tax on its profits however when the purchaser buys it to live it then it will be a capital asset in their hands.
The crucial fact from AMC’s perspective is that from an English law perspective apart from when it sold its shares in Carlco it has never made a profit be it a trading profit or a capital profit from selling a capital asset so it does not have any profits to pay to be able to pay the special dividend out of.
AMC has both share capital and a share premium account and I am doing further research to find out the order of precedence in which a dividend is funded from as payment of a dividend out of a share premium account is income in the hands of shareholders.
If the share premium account is reduced by the accumulated losses then the dividend is not being funded out of the share premium account but solely by share capital which is a return of capital.
AGE
I think you meant to type it would be wrong to pay dividends tax when it is a return of capital as you will do pay tax on a loss.
The loss that you will make if you sold all of your shareholding after receiving the special dividend can be paid be offset against capital gains made in 2023/2024 and if the net result is a loss then this can be carry forward to future tax years.
To be able do this you must submit a tax return for 2023/2024.
The tax base cost of our shareholdings when AMC went XD will have to be reduced by the 1.80p special dividend.
AGE
When I submit my tax return for 2023/2024 via the HMRC website I am going to produce a word document and submit it to HMRC as part of my tax return.
I will explain what I have done on my tax return and the reasons for doing so and it will make reference to the relevant case law.
I will email the word document to who ever wants it.
AGE
The NOMAD is very unlikely to tell you whether it is income in the hands of U.K. shareholders and hence subject to U.K. dividends tax on the basis it is a foreign dividend as it was paid by a BVI domiciled Company or whether it is a return of capital.
It is up to the Board of AMC to provide this information and it is highly unlikely they will do so as it is 269 days since they said they that they are turning their full attention to the tax payers implications of the special dividend to shareholders!
I think the Board are just burying their heads in the sand in the hope the issue will go away!
It appears as if the Board take action when they are forced into doing so as they did when Tom Winnifreth wrote an article questioning why there was no news re the special dividend date.
Similarly so the Board only issued an RNS once they were forced to so when AST issued an RNS re an RTO!
I posted many months ago that I would not vote for any RTO because the Board has a history of not communicating with shareholders.
AGE
Gwm121 the NOMAD’s phone number is shown on the bottom of all AMC RNS’s.
When I have rang the NOMAD in the past they told me they are not able to speak to retail shareholders.
Even if the NOMAD was able to talk to you they would not tell if the special dividend is a return of capital or not as AMC should do that.
The dividend was received on the 14 June 2023 which falls in the 2023/2024 tax year and the deadline for submitting a paper tax return for 2023/2024 is the 31 October 2024 so you have lots of time left to submit it.
It has been 264 days since the Board stated that they are turning their full attention to the tax issues relating to the payment of the special dividend to shareholders.
If they have not supplied the information after 264 days then it is highly unlikely that they ever will as the most appropriate time to do so would have been when they announced the projected special dividend payment date.
AGE
It produces!
You can calculate if you made a gain or a loss by using the
Cgtcalculator.com website.
It does all the share matching for you she produces a report that you are supposed to send to HMRC with your tax return each year.
AGE
Mine has arrived in ii
AGE