Taxation of Special Dividends in conjunction with share consolidations

[Bouleversee]

Can anyone tell me whether special dividends are taxed as any other dividends if there is a share consolidation at the same time. If so, I don't think much of them! Belatedly doing my tax return for 2022-23 and I see I had a rather large dividend from Tate & Lyle in May 2022, accompanied by a consolidation, which will take me well over the dividend allowance since I still hold in certificated form and had not anticipated. I expect I will just have to cough up. I must get rid of my certificated shares before allowances come down further. At least the rate will be only 7.5% for 22-23 unless it takes me into higher rate tax; haven't got that far yet. Not enough hours in the day!

[Alaric]

Can anyone tell me whether special dividends are taxed as any other dividends if there is a share consolidation at the same time.

The paperwork from the registrars or the company should tell you whether it was paid as a return of capital or as a dividend.

https://www.tateandlyle.com/sites/defau ... rfinal.pdf

in which

Special Dividend
The Company is not required to withhold UK tax when paying a dividend. Liability to tax on the Special
Dividend will depend upon the individual circumstances of an Ordinary Shareholder.
(A) UK resident individual Ordinary Shareholders
Under current UK tax rules, specific rates of tax apply to dividend income. These include a nil rate
of tax for the first £2,000 of non-exempt dividend income in any tax year (the “Dividend
Allowance”) and different rates of tax for dividend income that exceeds the Dividend Allowance.
No tax credit attaches to dividend income. For these purposes, “dividend income” includes UK and
non-UK source dividends and certain other distributions in respect of shares.
An individual Ordinary Shareholder who is resident for tax purposes in the UK and who receives
the Special Dividend will not be liable to UK tax to the extent that (taking account of any other
non-exempt dividend income received by the Ordinary Shareholder in the same tax year) that
dividend falls within the Dividend Allowance.

This confirms it was a dividend taxed in parallel with other dividends.

The share consolidation was a device to keep the share price in the same range as before the special,

So it goes against the £ 2000 allowance.

[scrumpyjack]

Can anyone tell me whether special dividends are taxed as any other dividends if there is a share consolidation at the same time. If so, I don't think much of them! Belatedly doing my tax return for 2022-23 and I see I had a rather large dividend from Tate & Lyle in May 2022, accompanied by a consolidation, which will take me well over the dividend allowance since I still hold in certificated form and had not anticipated. I expect I will just have to cough up. I must get rid of my certificated shares before allowances come down further. At least the rate will be only 7.5% for 22-23 unless it takes me into higher rate tax; haven't got that far yet. Not enough hours in the day!

If it is declared as a dividend it is taxed as any other dividend. Whether or not there is a share consolidation does not affect this.
Annoyingly Tesco did the same thing when they sold their far east business. They declared a special dividend of over £5bn and then did a share consolidation.

[Bouleversee]

It was definitely a special dividend so taxable on receipt then. However, I read today that the dividend allowance for 2022-3 was £1,000. If it's £2k, I might not. have to pay tax on it or not much of it anyway.

[kempiejon]

It was definitely a special dividend so taxable on receipt then. However, I read today that the dividend allowance for 2022-3 was £1,000. If it's £2k, I might not. have to pay tax on it or not much of it anyway.

https://www.gov.uk/tax-on-dividends
Tax year Dividend allowance
6 April 2023 to 5 April 2024 £1,000
6 April 2022 to 5 April 2023 £2,000
6 April 2021 to 5 April 2022 £2,000
6 April 2020 to 5 April 2021 £2,000
6 April 2019 to 5 April 2020 £2,000

[Bouleversee]

Thanks, both.

Bouleversee