absolutezero wrote:These things always annoy me.
An irritation for CGT record keeping if/when I ever sell it.
Add in the fact that you are usually no better off afterwards but have a smaller shareholding and some cash that added together usually equal the value of the shares you held before.
absolutezero wrote:The market has given these proposals a big fat MEH.
Didn't do much for the share price yesterday and down 1.5% as I type today.
I might sell it before they do this nonsense and then buy it back afterwards. If it still looks good. Or redeploy the cash.
It will keep my CGT calcs simpler.
As far as I can see, selling and buying back afterwards will just mean that you have a set of CGT calculations to do in the near future plus another if and when you eventually sell, rather than just having the latter - and it doesn't significantly simplify the latter.
As an example, suppose someone has a holding of 1400 TATE shares bought many years ago for £5,600 inclusive of costs. If a special dividend of say 110p per share is paid accompanied by a 6-for-7 share consolidation (reasonable figures given what we know, but
not a prediction!) and they do nothing, for CGT purposes their holding consolidates to one of 1200 shares, still with a base cost of £5,600. If they eventually sell that holding for say £12,000 after costs, the gain for CGT purposes is £12,000 - £5,600 = £6,400.
Suppose they instead sell in the near future for say £10,500 after costs, and after this is all over use that to buy a holding of 1390 TATE shares inclusive of costs (*). For CGT purposes, they make a gain of £10,500 - £5,600 = £4,900 in the near future, and if they eventually sell the holding for £13,900 after costs (i.e. roughly the same price per share as above), they'll then make a gain of £13,900 - £10,500 = £3,400.
In the first example, they also receive a special dividend of £1,540, but that isn't relevant to CGT, just to Income Tax; in the second, they don't. So their near-future taxation comparison is £1,540 subject to Income Tax in the first example and £4,900 subject to CGT in the second, and that's accompanied by a possible-eventual-future comparison of £6,400 subject to CGT in the first example and £3,400 in the second. (Though a more like-for-like comparison would assume that they spend what's left of the £1,540 after Income Tax on buying more TATE shares, since that would keep the entirety of the original investment in TATE shares rather than splitting some of it out to be invested in other shares or for other purposes. Depending on personal tax circumstances, that could result in up to about 200 more TATE shares for the possible eventual sale in the first example and up to about £500 more gain on that sale.)
How such tax comparisons work out for individual HYPers will depend a lot on their tax circumstances, and I've no intention of going into it here - such questions are basically a matter for the Taxes board. But the point I'm making here is that special dividends don't affect CGT any more than any other dividends do, and share consolidations (and splits) only require simple adjustments for CGT: basically, change the number of shares in the holding without changing its base cost (**). And there are no special tax rules for special dividend + share consolidation combinations: the CGT treatment is the standard one for a share consolidation.
I've certainly seen companies come up with methods of returning excess capital to shareholders that complicate CGT calculations, such as issuing Redeemable shares accompanied by share consolidations and B share schemes (especially the old no-longer-effective ones that allowed shareholders the choice of receiving their payment as dividends or as capital payments). But special dividends accompanied by share consolidations are not one of them.
(*) This basically assumes they get the same price per share for the sale and the purchase - the 10 shares that go missing from the original 1400 shares roughly account for the stamp duty of ~£50 on a purchase of ~£10k plus two broker commissions.
(**) Unless you receive a fractional entitlement payment (which I've assumed doesn't happen in the above examples because it will make at most a tiny difference), in which case subtract it from the base cost. For completeness, there is a conceivable but very unlikely possible complication here that I've never seen actually happen: if doing that subtraction would make the base cost negative, it has to be handled differently.
Gengulphus
And let's not go too far with the TATE sentiment - with dividends more or less keeping up with RPI (what would have happened in future with inflation picking up would have been interesting to see) and TR below my median - it's been fair to middling, not outstanding.