Land Securities - proposed 60p per ord cash return etc

[Lootman]

I don't disagree that if returning the cash to shareholders is the best idea the board can come up with then that's a good idea, but I expect good companies to be identifying opportunities, not shrinking the company. If a company like Land sells an asset shouldn't they be in the business of buying another asset and making a profit? that's not squandering, that's business development. If a suitable asset is not readily available I'm happy for them to build a war chest, ready for when the opportunity comes. Right now we're less than two years from a major political event called Brexit, which is going to stir up who knows what. I'd have thought that alone would be pause for thought before parting with the cash.

In that case, you should avoid the shares of Melrose. Their business model is to buy engineering and industrial businesses that are not doing well, restructure them, and then sell them on. It's a sound model and investors in their shares have done well.

However, their policy is to distribute cash when they sell a holding, and then later do a rights issue to fund the next acquisition. Last year it actually disgorged most of its net value in cash, following a disposal, and then did a rights issue to raise funds.

If you hold it, you need to not mind such back and forth.

[Gengulphus]

At a level generally thought to be near the top of the property cycle, management is to be congratulated for making a capital return to shareholders.

All that the company has said in RNSes so far is that "cash" will be returned to shareholders (see https://www.investegate.co.uk/land-sec- ... 00032099M/). So unless you've got some other reasonably authoritative source, I'm afraid your congratulations to management are premature!

Gengulphus

[Blagdon]

I thought that the tax law was changed a few years ago, so that tax wise this will be considered income not capital not matter what you chose to call it -- My recollection could be wrong though.

[Lootman]

I thought that the tax law was changed a few years ago, so that tax wise this will be considered income not capital not matter what you chose to call it -- My recollection could be wrong though.

The change that you are referring to, as I recall it, was more that a cash distribution can be either a capital one or an income one, but that it can no longer be a choice of the two. That is a decision that is now made by the company, based on the shareholders' vote.

So if the shareholders were mostly small investors, they might vote for a capital distribution, as that is more tax-friendly for many. But if they are mostly institutions, as is surely the case here, then the vote might more likely be for income. since those institutions are either tax-exempt, like pension funds, or are taxed on a mark-to-market basis.

[PinkDalek]

I thought that the tax law was changed a few years ago, so that tax wise this will be considered income not capital not matter what you chose to call it -- My recollection could be wrong though.

The change that you are referring to, as I recall it, was more that a cash distribution can be either a capital one or an income one, but that it can no longer be a choice of the two.

The UK tax situation doesn't preclude there still being an income/capital return choice, where B share schemes are concerned, but the changes from 6 April 2015 meant they'd be treated as income come what may (in most circumstances - I imagine there are some schemes available).

[Lootman]

The UK tax situation doesn't preclude there still being an income/capital return choice, where B share schemes are concerned, but the changes from 6 April 2015 meant they'd be treated as income come what may (in most circumstances - I imagine there are some schemes available).

I always defer to you on these matters, as you know. But a cash distribution resulting from various kinds of corporate actions, such as lapsed rights issues and share consolidations, is surely still a true capital distribution and not income?

I did receive a small cash distribution from a share consolidation last year from a UK company which did not appear as a dividend on my broker's consolidated tax statement. I therefore treated it as a distribution of capital for tax purposes and, it being small, I elected to carry it forward.

It was only about 30 quid so I doubt that I am going to get into trouble from it either way. But if what you say is true and brokers continue to call it a "capital distribution" and then exclude it from their tax certificates, I suspect a lot of people who rely on those certificates will be getting this wrong on their tax return. As it was, I nearly missed that one altogether.

[PinkDalek]

OT to the subject header.

The UK tax situation doesn't preclude there still being an income/capital return choice, where B share schemes are concerned, but the changes from 6 April 2015 meant they'd be treated as income come what may (in most circumstances - I imagine there are some schemes available).

I always defer to you on these matters, as you know. But a cash distribution resulting from various kinds of corporate actions, such as lapsed rights issues and share consolidations, is surely still a true capital distribution and not income?

I shouldn't, especially as I don't put what I'm trying to say in well thought out words!

The difference with what you've described is the lack of choice between income and capital. The B share schemes of old had such a choice and that is what has, effectively, been nipped in the bud.

I did receive a small cash distribution from a share consolidation last year from a UK company which did not appear as a dividend on my broker's consolidated tax statement. I therefore treated it as a distribution of capital for tax purposes and, it being small, I elected to carry it forward.

It was only about 30 quid so I doubt that I am going to get into trouble from it either way. But if what you say is true and brokers continue to call it a "capital distribution" and then exclude it from their tax certificates, I suspect a lot of people who rely on those certificates will be getting this wrong on their tax return. As it was, I nearly missed that one altogether.

Sounds like you've probably treated it correctly (although you don't really mean carried forward - more likely knocked off your s104 pool).

The brokers wouldn't include it on the consolidated (tax) voucher as it wasn't a dividend. You'd still have received it somewhere or other. That's why those of us who like to keep thorough records do so, in advance of getting the certs! I do appreciate you deal far more than I and such records would likely be harder to maintain. We check through the list of receipts (as against dividends in the cert) to look out for such items that may have been missed by us when compiling the information during the tax year.

[Gengulphus]

OT to the subject header.

I did receive a small cash distribution from a share consolidation last year from a UK company which did not appear as a dividend on my broker's consolidated tax statement. I therefore treated it as a distribution of capital for tax purposes and, it being small, I elected to carry it forward.

Sounds like you've probably treated it correctly (although you don't really mean carried forward - more likely knocked off your s104 pool).

About that correction: the s104 pool is basically your total allowed costs on the shares. So deducting a small capital distribution from the s104 pool reduces the allowed costs by that amount and increases the eventual gains by the same amount.

Carrying the small capital distribution forward to be included in the disposal proceeds when those gains eventually happen will of course do exactly the same thing - so you might wonder why the correction? The answer is an additional rule: you cannot use small capital distributions to reduce the s104 pool below zero. Once it comes down to zero (which can happen partway through a small capital distribution), further small capital distributions have to be treated as gains realised at the time - which incidentally means as pure gains, since there are no longer any allowable costs to be deducted. If you instead carry the small capital distribution forward, you may well not spot that rule applying.

It's not a rule that becomes relevant very often, but it can if the shareholding has grown dramatically since original purchase (so that the s104 pool is small as well) or the company makes enough of a habit of making small capital distributions.

Gengulphus

[Bouleversee]

I haven't heard a word about this from my brokers though my son has had a message about it from Selftrade. I presume they are not x-div. till the meeting and no doubt my brokers will say there is no need to tell me till the resolution has been passed, though as my late husband had a pretty large holding which is due to nearly £1000 from this payout it is something worth knowing and considering when I am deciding which shares to sell and which to keep'. They are in the p/f which could go directly into my ISA under the APS , unless that is the consensus of opinion is that post Brexit the demand for commercial properties will not be great and are not worth keeping, Does anyone have any views on their future prospects? I suppose the s.p. is likely to go down once they do go ex-special dividend or whatever.

[PinkDalek]

Gengulphus has explained the tax treatment of the "B'' shares over at HYP - Practical, as linked below. I'm including this here so I can find it at a later stage (being on a mobile somewhere in Europe and forgetting or not having the time to bookmark the post with ease):

viewtopic.php?f=15&p=79670#p79670

[77ss]

Gengulphus has explained the tax treatment of the "B'' shares over at HYP - Practical, as linked below. I'm including this here so I can find it at a later stage (being on a mobile somewhere in Europe and forgetting or not having the time to bookmark the post with ease):

viewtopic.php?f=15&p=79670#p79670

Coming late to this thread. I don't hold LAND, but I have been idly wondering how Hansteen intends to implement their ''Proposed Return to Shareholders of up to £580 million by end of 2017".

HSTN says "The Board's intention is to ensure that the £580 million is treated as a capital return"


Perhaps this will also be done via a B share scheme?

[PinkDalek]

Gengulphus has explained the tax treatment of the "B'' shares over at HYP - Practical, as linked below. I'm including this here so I can find it at a later stage (being on a mobile somewhere in Europe and forgetting or not having the time to bookmark the post with ease):

viewtopic.php?f=15&p=79670#p79670

Coming late to this thread. I don't hold LAND, but I have been idly wondering how Hansteen intends to implement their ''Proposed Return to Shareholders of up to £580 million by end of 2017".

HSTN says "The Board's intention is to ensure that the £580 million is treated as a capital return"


Perhaps this will also be done via a B share scheme?

The wording I see from http://www.londonstockexchange.com/exch ... 38663.html is more informative (my bold):

Return to Shareholders

The Board proposes to return up to £580 million in aggregate to Shareholders which is the equivalent of 70p per share. The Board currently anticipates that this return will be implemented by the end of 2017, and a circular will be posted to shareholders in due course. The Board's intention is to ensure that the £580 million is treated as a capital return and not an income return.

The precise mechanics may well be done as you suggest.