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.
Subscribe to 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
-
Bargain bling: invest in luxury stocks while they are out of style?Although sellers of luxury goods are more insulated than many industries, economic headwinds have been holding them back too. Is now a good time to pick up a bargain?
-
Inheritance tax pension rule could make six times more over 55s liable – how investing in onshore bonds can helpFinancial advisers have switched to recommending onshore bonds to help clients avoid inheritance tax and pass on wealth
