Unilever Chairman wrote: We believe it to be unlikely that abolition will not happen, but nevertheless we have a robust fallback solution which is free of Dividend Withholding Tax.
That was some form of capital distribution I believe. That would be potentially liable for UK CGT and if this form of disguised dividend came into widespread use, you couldn't rule out a UK or Dutch Government legislating to treat it as dividend.
As far as the Dutch are concerned, the Unilever scheme document seems pretty clear that yes, the "dividend substitution payments" are capital distributions, and I don't see any reason why the UK would think they're not (but see below about the UK tax treatment
And it seems fairly clear to me that on the current Dutch government's plans, they'll have no great interest in legislating to treat it differently: as things stand, they don't get any withholding tax from Unilever plc dividends paid to non-Dutch taxpayers, they're willing to give up the withholding tax on Unilever NV dividends paid to non-Dutch taxpayers, and AFAIAA they don't have CGT at all (*). And from the start of 2020, their plans say they won't collect any withholding tax or CGT at all. They might introduce legislation to treat it as a dividend for Dutch income tax purposes, but that will only affect Dutch taxpayers - they would have to bring withholding tax (or something similar) back in to affect non-Dutch taxpayers.
As far as UK tax is concerned, the Unilever scheme document seems pretty clear that the payment one gets will be treated as a dividend regardless of whether you choose to receive it as a dividend or a "dividend substitution payment" capital distribution. And that seems perfectly consistent with the UK tax law change that came in a few years ago saying that if shareholders get to choose individually (**) whether to receive a payment from a company as a dividend or as capital, it gets treated as dividend income regardless of the choice they make. So if I've understood that correctly, one basically can
rule out a UK government legislating to treat it as dividend - because they've already done so! (***)
So as long as the current
tax situation (both Dutch and UK) is concerned, I don't see anything much wrong with the Unilever scheme. But for UK taxpayers who are not Dutch taxpayers as well (i.e. probably most of us), after the scheme they will be vulnerable to both the risk of the UK government changing its tax rules/plans and the risk of the Dutch government changing its tax rules/plans, while as the company structure currently stands, they're only vulnerable to the first of those risks. So basically, for such taxpayers, adopting the scheme means taking on an extra tax risk that they don't actually need to.
That isn't of course a decisive argument - depending on the size of the risk and the importance of other considerations, it might be outweighed by those other considerations. But the risk of the Dutch government changing its tax rules/plans appears to me to be significant (not major, but a good deal more than negligible): the Reuters article
scrumpyjack linked to earlier in this thread seems pretty clear that the abolition of the withholding tax is not popular in the Netherlands - nor even in its governing coalition. And the fact that the Dutch government is in practice always a coalition and formed after an often-lengthy negotiation between the parties does IMHO make such points (i.e. ones that can't be all that important to the big picture of the country's welfare, but do have fairly strong political support in one direction or the other) less likely to be decided by whether they're in or out of any particular party's overall package and more likely to be settled by the coalition negotiations.
The main other considerations I've seen are those about the arrangements for UK shareholders to hold the new Unilever NV shares, including the transition to them, and about what the benefits are for the company. I haven't yet looked at the former in detail - they're decidedly long and complex - but my first impressions on skimming them are less than favourable (and I think that matches what others have said above) and I'm pretty certain that they'll at best end up as neutral, not favourable. And the benefits to the company described in the scheme document seem decidedly vague and unquantified - I think they're summed up in the following paragraph:
The Boards believe that a single holding company will bring greater simplicity and more flexibility to make strategic changes to the Unilever Group’s portfolio in the future, should Unilever choose to do so, including through equity-settled acquisitions or demergers. Although Unilever does not currently plan any major portfolio change, the Boards believe it is appropriate to create a corporate structure that provides Unilever with the strategic flexibility and optionality to do so.
I'm not especially in favour of the companies I'm a shareholder in doing "equity-settled acquisitions or demergers" (the latter in particular usually just create hassle for me) and I don't think I've noticed any particular difficulties Unilever has had with making strategic changes to their portfolio, in particular by acquiring and disposing of brands.
Also, while various people have commented that the current dual-company structure must be costing Unilever more than the simplified structure would, I have not found a single word in the scheme document about anticipated cost savings from the simplification proposals, let alone any figure for them. It's possible I've missed something, of course, but it looks very much to me as though any cost savings (if they exist at all) are so laughably small compared with the size of Unilever that the Board reckons putting them forward as a reason for the scheme would be seen as grasping at straws, and so weaken their case rather than strengthen it.
So to sum up, as far as I can currently see, the proposed simplification adds an unnecessary and non-negligible tax risk for me, might make the method of holding the shares less attractive to me (though I've yet to determine whether it will do that or just be neutral), and the only argument the Board has put forward in favour of it seems to be to make it easier for them to do things of a general type I don't especially want them to do. Even with the holding-method issue not yet resolved, that adds up to a clear case against the simplification proposal for me.
(*) Before every CGT payer rushes to emigrate to the Netherlands, check all
their taxes: AFAIAA, they do
still have a wealth tax!
(**) Rather than as a joint decision binding on all shareholders as could be done with a shareholder resolution.
(***) And I for one am not sorry about that: I've wasted far too much of my life getting to grips with the tax consequences of the "B share schemes" that allowed shareholder such choices when they still really did give a choice between being taxed by Income Tax or by CGT. I probably improved my tax situation somewhat by doing so - but I'm not entirely certain about that, and I'm rather more doubtful that I got enough overall benefit to really be a good 'pay rate' for the time they needed - taking the bigger costs for the company of such a scheme over a simple dividend into account as well as any tax benefit. And as the size of any overall benefit depends on the size of the shareholding and the time and effort required don't, that has be much more doubtful for smaller shareholders than me...