scottish power shares

moneyandmountains

jem16 wrote:

So as a higher rate tax payer I should go for the Initial Repurchase Offer or the Future Repurchase Offer?

From what I can see the only difference between these two offers is that I would receive dividends on the B shares if I hold onto them until 2011 when SP say that they would expect to have repurchased all B shares.

Is it better to hold onto them until then or should I sell them in May when I receive them?

Well, this depends on a couple of factors.

1) If you think that the dividend yield is worthwhile, then you may want to keep hold on them for the future repurchase offer.

2) If you will exceed your CGT limit this year, then you may want to consider whether to defer the capital gain i.e. future repurchase
or take the hit now i.e. initial repurchase

jem16

moneyandmountains wrote:

Well, this depends on a couple of factors.

1) If you think that the dividend yield is worthwhile, then you may want to keep hold on them for the future repurchase offer.

It would apparently be in the region of £10 pa - not exactly a huge amount.

2) If you will exceed your CGT limit this year, then you may want to consider whether to defer the capital gain i.e. future repurchase
or take the hit now i.e. initial repurchase

I'm not planning on selling anything that would make me liable for any CGT either this year or in the foreseeable future.

ceejam

If you take the special dividend on B shares, they become Deferred shares, which are pretty much worthless and you can't then sell them for any worthwhile price.

If you hang onto B shares, they don't get a dividend, just an interest payment on their £3.60 value of around 3.4% pa, you'd get a better return if you sell them and put the cash in a decent saving account!

So unless you are going to be liable for CGT by selling them this year, the initial repruchase looks to me to be the best option! As a non taxpayer, I would think the dividend is the best move.

jem16

ceejam wrote:

If you take the special dividend on B shares, they become Deferred shares, which are pretty much worthless and you can't then sell them for any worthwhile price.

If you hang onto B shares, they don't get a dividend, just an interest payment on their £3.60 value of around 3.4% pa, you'd get a better return if you sell them and put the cash in a decent saving account!

Is that 3.4% before or after tax? I'm a higher rate tax payer so any savings account is going to charge me 40% on my interest usually lowering even the best account down to about 2.9%.

caveat_emptor

ceejam wrote:

If you take the special dividend on B shares, they become Deferred shares, which are pretty much worthless and you can't then sell them for any worthwhile price.

If you hang onto B shares, they don't get a dividend, just an interest payment on their £3.60 value of around 3.4% pa, you'd get a better return if you sell them and put the cash in a decent saving account!

So unless you are going to be liable for CGT by selling them this year, the initial repruchase looks to me to be the best option! As a non taxpayer, I would think the dividend is the best move.

But dividends are taxed at 10% whether you're a tax payer or not, thanks to the Chancellor.

moneyandmountains

caveat_emptor wrote:

But dividends are taxed at 10% whether you're a tax payer or not, thanks to the Chancellor.

However, you get a tax credit for this.

I am starting to think that the CGT route looks less hassle, regardless of income tax position.

Kellm9

Apparently I have the following choices as below. I have 100 shares and I am a lower rate tax payer. I am not clear which option to take. I think it is between 1 & 2 but don't really understand the difference. Can someone explain in simple terms the difference between 1 & 2 ? I have read the full thread but am still not clear. Thanks, Kellm9.


You have the following options:
1. Elect to receive a single dividend per "B" share..
2. Elect to have some or all of your "B" shares redeemed immediately.
3. Elect to retain your "B" shares with the right to redeem on certain dates in the future.

ceejam

1. the shares become worthless after the dividned is paid, and scottishpower will at some date "acquire" remaining "deferred" shares.

2. Assuming yuo aren't expecting to make any other CGT disposals you sell the B shares and get £3.60 for each one tax free.

3. Only for those with CGT issues, or employees with shares held in trust in the ESOP scheme.

Kellm9

Umm strange, email from my share account saying -

"We're sorry to tell you that a recent corporate action on one or more of your stock holdings was set up incorrectly and has now been deleted."

What does this mean for the shares and dividents ?

msw_2

I am a basic rate taxpayer. having read through all the info from SP I thought I'd be best to do the initial repurchase and have the pay out treated as capital - hence no tax to pay (for me). However, after reading this thread I'm now confused. It's mentioned above that a basic rate taxpayer should take the dividend payout - but wouldn't the income be taxable (at the basic rate)?