HP Share split

Discussion in 'Tax' started by Matrix001, Oct 16, 2016.

  1. Matrix001

    Matrix001 New Member

    Posts:
    2
    Hi,

    HP had a share split in 2015 that triggered a dividend payment. This was structured to not attract tax in the US.

    HP's FAQ notes
    "
    The separation occurred by means of a pro rata distribution to HP Co. shareholders of 100% of the outstanding shares of Hewlett Packard Enterprise. Each HP Co. stockholder received one share of Hewlett Packard Enterprise common stock for every one share of HP Co. common stock held on October 21, 2015, the record date for the distribution. Consequently, the separation provided HP Co. stockholders with ownership interest in both HP Inc. (stock ticker HPQ) and Hewlett Packard Enterprise (HPE). These shares can now be traded independently.

    For example, if you held 100 shares of HPQ (HP Co.) before the separation, you would now hold 100 shares of HPQ and 100 shares of HPE.
    What are the income tax consequences of the distribution to stockholders in the US and Canada?It is intended that, for U.S. federal income tax purposes, the distribution generally will be tax-free to HP Co. stockholders.Based on the information we have received the Canadian regulatory authorities, under Section 86.1(2)(e) of the Canadian Tax Act, the Hewlett Packard Enterprise Company dividend distribution generally should be tax-free to Hewlett-Packard Company’s stockholders that received the dividend.

    "

    Does the same apply in Ireland? I notice that keytrade did not withhold tax on this split, so presumably was not an issue in Belgium.

    Other coupon payments had US withholding tax in the normal way.

    Thanks!
     
  2. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    30,328
    A simple share split would not have any tax implications. So what is described in the FAQ would not have any tax implications.

    What do you mean when you say it "triggered a dividend payment"?

    Brendan
     
  3. Matrix001

    Matrix001 New Member

    Posts:
    2
    Thanks - this makes sense.

    I was just confused as it was listed as "Type on income: SDV - Stock dividend" under CREDIT COUPONS on Keytrade. Hadn't come across this before.
     
  4. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    30,328
    I certainly wouldn't consider a share split a dividend.

    Brendan
     
  5. thedaddyman

    thedaddyman Frequent Poster

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    609
    HPE will also be doing 2 more splits in the next 12 months, one as part of the business is spin-merged with a software company and another as part of the spin-merge with CSC. Hence any HP share holder pre the first split will end up owning shares in HPE, HP Inc, Spinco 1 and Spinco 2
     
  6. Jim Jones

    Jim Jones New Member

    Posts:
    1
    My understanding of the company split (as opposed to share split) and the two planned spin-off's and mergers is that the new shares will be taxed by Revenue.

    In 2015: HPQ split into two companies: HPQ & HPE.
    In 2017: April: HPE will spin-off a business unit (ES) and simultaneously merge it with CSC
    In 2017: H2: HPE will spin-off a business until (Software) and simultaneously merge it with Micro Focus

    If you held 1 share in HPQ before transaction 1 you will end up with the following by the end of this year:
    1 x HPQ
    1 x HPE
    1 x ES/CSC
    1 x SW/Micro Focus


    The new shares received as a result of each transaction are subject to income tax, PRSI and USC. Seems crazy to me, but that appears to be the situation.

    J.
     
  7. thedaddyman

    thedaddyman Frequent Poster

    Posts:
    609
    QUOTE="Jim Jones, post: 1500405, member: 99432"]My understanding of the company split (as opposed to share split) and the two planned spin-off's and mergers is that the new shares will be taxed by Revenue.

    In 2015: HPQ split into two companies: HPQ & HPE.
    In 2017: April: HPE will spin-off a business unit (ES) and simultaneously merge it with CSC
    In 2017: H2: HPE will spin-off a business until (Software) and simultaneously merge it with Micro Focus

    If you held 1 share in HPQ before transaction 1 you will end up with the following by the end of this year:
    1 x HPQ
    1 x HPE
    1 x ES/CSC
    1 x SW/Micro Focus


    The new shares received as a result of each transaction are subject to income tax, PRSI and USC. Seems crazy to me, but that appears to be the situation.

    J.[/QUOTE]
    My understanding is that the ES/CSC shares and SW/Microfocus shares will be subject to tax but not HPE. HPQ/HPE was simply a split whilst CSC and Microfocus are takeovers (regardless of the jargon HPE puts on it)