Dod101 wrote:Just received what is probably my biggest ever interim dividend from Admiral (or anywhere else) this morning. Made up of Normal 87.9 and special of 27.1 making a total of 115p as the dividend from earnings. Then another 46p being a share of the capital return from the sale of a business. I hope Matt holds these as he would appreciate the return of capital as a dividend rather than a share buyback.
I don't mind that but will need to decide how to record it because I do not like calling capital revenue.
As general discussion about the question of how to record such "returns of capital" by companies,
not advice specifically to Dod:
For UK tax records (if one needs to keep them), if the company calls it a dividend, record it as dividend income - disregarding anything the company might say about it being a return-of-capital dividend or suchlike. If they don't call it a dividend, it's almost certainly a capital distribution - there is an exception that if the company offered the choice of instead receiving it as a dividend, record it as dividend income. But companies basically stopped offering such choices when that rule came in, for the very sensible reason that such choices generally became utterly pointless at that point (there is a possible exception in the case of companies whose shareholders are mainly tax-resident in countries that haven't got similar tax rules - but I don't know of any case of such an exception happening). All of this is basically a matter of tax law, not personal preference.
For non-UK tax records (if one needs to keep them), I can't say anything more specific than "keep the records required by the foreign country's tax laws".
For non-tax records (if one wants to keep them), it's a matter of personal preference, not legal requirements. My preferred way of making such decisions is that regardless of whether the company calls a distribution a return of capital or a dividend:
* If it's accompanied by a share consolidation, I record it as a capital transaction, equivalent to a sale of the number of shares lost in the consolidation for the amount of the distribution.
* If it's not accompanied by a share consolidation, I record it as dividend income.
The reason why I make that distinction is that a share consolidation means that, assuming the dividend per share is held in the future, my future income from the holding will drop; if it is cut, my future income from the holding will drop by a larger percentage; and if it is raised, my future income from the holding will rise by a lower percentage, remain steady or fall. And similarly for the capital value, depending on what happens to the share price in the future rather than to the dividend per share. That's all just as if I had actually top-sliced the holding by the equivalent sale I record it as - so I apply an "if it looks like a duck and quacks like a duck, treat it as a duck" principle. (It isn't actually a duck, but the ways in which it differs are generally of little or no interest to a HYPer. For instance, the consolidation will generally increase the nominal value of the shares whereas the equivalent sale I record it as wouldn't do so - but does any HYPer care about the nominal value of Admiral shares being 0.1p???)
Doing that does have the disadvantage that one ends up keeping two different sets of records if one's HYP is too big to hold it entirely in tax-sheltered accounts. But of course, if that's the case, the only real way to avoid keeping tax records and "what's really happening to the entire HYP" records that differ from each other is not to keep the latter at all. (And not keeping "what's really happening to the entire HYP" records at all is a perfectly reasonable choice to make, just not one that will suit all HYPers - which is why I say "if one wants to keep them" above about non-tax records.)
Gengulphus