When companies have more cash on hand than they need, they may decide to hand some of it back to shareholders. In recent years, some firms have done this through what are known as special purpose share schemes. These schemes usually work by issuing new types of shares, typically called B shares and C shares, that are given to existing shareholders. Each shareholder gets the choice of which type of share they receive.
Shortly after issue, the company repurchases and cancels the B shares, handing the B share owners a profit taxed as a capital gain. Meanwhile, the C share owners get paid an equivalent dividend, taxed as income. The C shares then become worthless and are cancelled.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So from 6 April 2015, both alternatives have beentreated as income for tax purposes, eliminating the reason to offer these schemes.
-
Zoopla: House sales fall for first time in two years as buyers wait for Autumn BudgetThe average price of a house in September was £270,000, down £1,000 from August as the housing market’s Christmas slowdown came early, Zoopla says
-
Number of high-earning women jumps 12% – how to convert income into pensionsMore women than ever are paying the highest rate of tax as record numbers succeed in high paying professional roles. But their pension saving still needs to catch up
