3 May 2018 07:09
AVEVA GROUP PLC
Update on UK Tax Treatment of Return of Value
AVEVA Group plc ('AVEVA' or 'the Group'), a global leader in engineering and industrial software, gives the following update on the UK tax treatment of the £10.15 per share return of value that was effected by way of an issue and redemption of B Shares on 1 March 2018 (the 'Return of Value').
AVEVA has now received confirmation from Her Majesty's Revenue and Customs ('HMRC') that the Return of Value will not be treated as a distribution and therefore will not be taxed as income in the hands of recipients for UK tax purposes. This is in line with AVEVA's expectations based on tax advice received and as set out in Part XI of the Prospectus relating to the combination with the Schneider Electric industrial software business, which completed on 1 March 2018. It is however contrary to the initial view expressed by HMRC (as communicated to and announced by AVEVA in December 2017).
The issue and redemption of the B shares to effect the Return of Value will therefore, subject to the shareholder's particular circumstances and any available exemption or relief, give rise to a chargeable gain (or allowable loss) for the purposes of the United Kingdom taxation of capital gains and corporation tax on chargeable gains.
In relation to this, HMRC has also confirmed that in its view, the issue of the B shares to shareholders should not be treated as a tax-free reorganisation of the AVEVA's share capital, but that instead shareholders in receipt of B shares arising from the B share scheme should be treated as making a part-disposal of their holding of ordinary shares when the B shares were received, which would give rise to a chargeable gain (or allowable loss) for UK tax purposes. On the subsequent disposal (by way of redemption for cash pursuant to the Return of Value) of the shareholder's B Shares, which in theory could also give rise to a chargeable gain (or allowable loss), in practice the aggregate base cost attributable to the holding of B shares should equal the proceeds of disposal, such that no further chargeable gain or allowable loss should arise for UK tax purposes. On both disposals the chargeable gain (or allowable loss) will depend on the shareholder's particular circumstances as noted above.
Although this aspect of the UK tax treatment of the Return of Value is different to AVEVA's initial expectation (based on tax advice received at the time as set out in Part XI of the Prospectus, and subject to the possibility of HMRC taking a differing view as highlighted therein) that it should be the redemption of the B shares rather than their issue that should normally give rise to a chargeable gain or allowable loss, since the overall result for UK tax purposes should be the same, AVEVA does not intend to have further discussions with HMRC on this matter.
Shareholders may wish to seek their own tax advice in this regard.
Enquiries:
AVEVA Group plc
Matt Springett, Head of Investor Relations
Tel: 01223 556 676
FTI Consulting LLP
Edward Bridges / Dwight Burden
Tel: 020 3727 1000