Dividend or capital gain?

T

TheGreenMan

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I've just received a payment in lieu of shares in a UK company (ie they sold part of their buisness and gave profits back to shareholders as either shares or a cast payment). My question is for tax purposes is this payment treated as a dividend of a capital gain?
 
contemporary said:
if you never had the shares i'd say it was a capital gain
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I don't understand the bit about "if you never had the shares" but I would agree that this would be assessable for CGT and not income tax. Similar to the First Active capital repayment to shareholders a while back before they were eventually taken over.
 
what i am trying to say clubman is that divies are paid out based on a share holding, he said he got the cash in lieu of shares so you cant get a divie on shares you never held
 
OK - I see what you mean now. If you check the documentation relating to the payment then it should make it clear what class of payment it is. I suspect that it is a capital repayment and, as such, most likely assessable for CGT. If there was no witholding tax then it most likely is not a dividend. If in doubt check with Revenue and/or get independent, professional advice.
 
Is it Viridian you are talking about? I got a cheque from them yesterday and I am trying to figure out the tax implications. I am pretty sure it is a capital (gains) repayment not a dividend as they are redeeming (taking away) 10% of my shares. In my case I will be below the CGT threshold anyway.
 
Yes it is Viridian and it does look like a straightforward selling of shares. I'll have a closer look at the letter this evening and contact revenue if necessary. Hopefully it will be a capital gain as its also well below the threshold for me.
 
I think they are redeeming 10% of the shares. That means that for CGT purposes the capital gain is the cheque you got minus 10% of the original cost of the shares. For your remaining shares when it comes to disposing of them you will be assumed to have paid only 90% of what you actually paid.
I lost my original letter setting out the tax implications in the UK, so if you could confirm this it would be appreciated.
 
That attribution of 10% of the original acquisition cost of the shares to the disposal of these shares seems correct. This is similar to what happened when First Active did their capital repayment to shareholders by way of the issuance of special shares to shareholders based on their existing shareholding with the former immediately liquidated via the capital repayment. Best to keep tabs on the calculations now for the purposes of working out any future capital gains issues.
 
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