Capital Distribution (VINALAND)

[jaizan]

I hold shares in an investment company called Vinaland.

In the previous tax year, they had a "capital distribution" which my broker did NOT describe as a dividend in the statement.
After much research, I figured it should be treated as a capital gain, which was rather annoying as that was in the era of the short lived £5k tax free dividend allowance.

This year, they have had another "capital distribution", which is described in all the same ways in their RNS statements. However, my broker statement now describes it as a dividend, so presumably this will show in the end of year tax statement as a dividend. Slightly annoying as I expect to exceed the £2k dividend allowance applicable at present.

More importantly, I would like to check this treatment is correct, as since I'm "retiring", I want to fully utilize my capital gains tax allowance with other disposals, in order to use my full ISA allowance and raise funds for living.

[PinkDalek]

I hold shares in an investment company called Vinaland.

This one VinaLand Limited, the AIM-quoted investment vehicle ... https://investegate.co.uk/CompData.aspx?VNL ?

In the previous tax year, they had a "capital distribution" which my broker did NOT describe as a dividend in the statement.
After much research, I figured it should be treated as a capital gain, which was rather annoying as that was in the era of the short lived £5k tax free dividend allowance.

This year, they have had another "capital distribution", which is described in all the same ways in their RNS statements. However, my broker statement now describes it as a dividend, so presumably this will show in the end of year tax statement as a dividend. Slightly annoying as I expect to exceed the £2k dividend allowance applicable at present.

Can you point to which RNSs in particular? I ask as there appear to be quite a few, such as this one:

https://investegate.co.uk/vinaland-limi ... 07452331R/

Is there no documentation available that may outline the UK tax treatment or describe what's taking place in more detail - I've only found this so far:

https://vnl.vinacapital.com/capital-return/

Edit: I've now found this https://vnl.vinacapital.com/faqs/ and this https://vnl.vinacapital.com/investment- ... -policies/

The former includes 16. Does VNL pay a dividend? No. The distribution policy of the Company, as contained in the Company’s Articles of Association …

The latter includes VinaLand Limited (“VNL” or “the Company”) is a closed-end investment company incorporated in the Cayman Islands. The Company is currently in a cash return period. ...

Also see FAQ 5. This treatment of VNL for tax purposes depends on each investor’s specific situation. Although VNL operates in many respects as a fund, we understand that investors in some European jurisdictions classify VNL as a company for tax purposes, on the basis that investors have no short-term redemption rights. Please consult your tax advisor for more specific details in respect to this matter.

I'll leave it to others to thrash out whether these distributions are treated as capital or income!

[Parky]

My understanding is that you do nothing until you sell the shares, then you deduct the amount per share of the capital distribution from the acquisition cost of the shares, so that the capital distribution shows up as additional capital gain, on which you are then taxed.

[jaizan]

The two RNS statements are:
https://investegate.co.uk/vinaland-limited/rns/distribution-of-capital-and-divestment/201806130807452331R/
and
https://investegate.co.uk/vinaland-limited/rns/distribution-of-capital-from-share-premium-account/201712201739019402Z/

The wording on both is the effectively same, yet my broker has put the June one in the statement as a dividend and the January one (announced December) is not down as a dividend and not in the consolidated tax certificate. I am querying it with the broker.

As for the idea of sorting it all out when I sell, well this has been a multi-year holding, so I need to account for each year's cash payouts in the tax return each year.

What I shall do is offload it as after the distributions of capital, it's no longer worth the complication.
However, I still would like to understand the tax treatment, so I can safely use the full CGT allowance with other disposals.

[genou]

The two RNS statements are:
https://investegate.co.uk/vinaland-limited/rns/distribution-of-capital-and-divestment/201806130807452331R/
and
https://investegate.co.uk/vinaland-limited/rns/distribution-of-capital-from-share-premium-account/201712201739019402Z/

The wording on both is the effectively same, yet my broker has put the June one in the statement as a dividend and the January one (announced December) is not down as a dividend and not in the consolidated tax certificate. I am querying it with the broker.

As for the idea of sorting it all out when I sell, well this has been a multi-year holding, so I need to account for each year's cash payouts in the tax return each year.

What I shall do is offload it as after the distributions of capital, it's no longer worth the complication.
However, I still would like to understand the tax treatment, so I can safely use the full CGT allowance with other disposals.

It is not possible to answer you without inspecting the company's accounts, but the answer is broadly -

if the company had distributable reserves, but chose to make a capital distribution out of premium, it is a CGT event.

if the company had to create distributable reserves by reducing its share premium account, it is a dividend.

Have fun here - http://webarchive.nationalarchives.gov. ... idance.pdf

[jaizan]

Thank you.

One thing is clear for future planning, anything which might get complicated is better placed inside my ISA.

[strophe]

genou's reply while comprehensive is only applicable to UK based companies. VNL is not a UK company. The company address is given as Ho Chi Minh, but the stock's ISIN, KYG936361016 (and the company website) suggests it is domiciled in the Cayman Islands.

This page might be useful:
https://www.gov.uk/hmrc-internal-manual ... l/saim5210

"The question is whether or not the ‘corpus of the asset’ is left intact after the distribution. If not, the receipt will be a capital receipt; if it is, the payment will be chargeable as income."