TSB Share offer

nandrews

Thanks for the heads up.
I will check mine on Monday.

Nigel

tjhughes1964

Anyone know the tax treatment of the bonus shares - or rather the cash received in lieu of them?

Is it income? Capital Gain? Does it come under the "less than £3K and 5%" rules? Is the money from Lloyds rather than Sabadell so subject to some weirdness?

bowlhead99

tjhughes1964 wrote: »

Anyone know the tax treatment of the bonus shares - or rather the cash received in lieu of them?

Is it income? Capital Gain? Does it come under the "less than £3K and 5%" rules? Is the money from Lloyds rather than Sabadell so subject to some weirdness?

The logical thing to do would be to characterise this as capital gain.

When you bought shares at the time of IPO, Lloyds said that if you met certain conditions they would give you additional shares, so instead of buying 10 shares for the £x that you laid out, you would have instead bought (say) 11 shares for the £x, reducing your cost per share to be compared against your later proceeds per share when you sell and do your CGT calculation, giving you a greater gain. A bonus receipt of shares is basically acquiring extra shares into your pool of owned shares at a cost of £0, so that any proceeds when selling them will give you a larger gain than you would have otherwise had.

In the end, the Sabadell purchase meant that the shares that were going to be given to you were sold by Lloyds to Sabadell instead, and Lloyds compensated you by giving you the cash difference between what you were going to give Lloyds for the shares (£0) and the purchase price per share from Sabadell.

This does not look like income to me - you are not receiving an income distribution (e.g. dividends, interest) from the company in which you are invested. You have not provided a service or money to 'earn' a return. It is a capital transaction to do with the agreed prices for buying and selling shares between parties and is your compensation for not receiving all the shares from Lloyds that they agreed you could have when you entered into the IPO paperwork.

However, the above is not tax advice - if the amounts are material you could seek guidance from a specialist or HMRC. You might like to argue that the money from Lloyds in lieu of the bonus shares for you to immediately sell, was ex-gratia and a 'gift' and unconnected to the IPO paperwork where you agreed to buy ten and get one free. Unlikely that would work.

Maybe there is something in your paperwork; one would assume it could be a frequently asked question received by TSB or Lloyds from retail investors, so you could ask them. Of course, not having to deal with retail investors any more, is one of the advantages that TSB got by moving under Sabadell's ownership.

per offering document sent out in April:


At the time of the IPO of TSB in June 2014, Lloyds implemented a bonus share scheme pursuant to which retail investors acquiring shares in TSB through the IPO and holding those shares for 12 months thereafter would, subject to certain conditions and limits, be entitled to receive a number of free and fully-paid up additional shares (Lloyds Bonus Shares) from Lloyds following that 12-month period (which expires on 25 June 2015). The terms of the scheme contemplate the scenario where a change of control of TSB occurs before the entitlement to the Lloyds Bonus Shares crystallises and provides that in such circumstances Lloyds would make arrangements to compensate investors. Accordingly, if the Offer becomes or is declared unconditional in all respects before 25 June 2015, Lloyds will make arrangements to pay, to any investors who would have been entitled to receive such Lloyds Bonus Shares under the terms of the scheme, the cash value of those Lloyds Bonus Shares (at the offer price to be paid by Sabadell). In addition, if the Offer period extends beyond 25 June 2015 (whether or not the Offer becomes or is subsequently declared unconditional in all respects or lapses) Lloyds intends to extend the compensation arrangements described above such that, in those circumstances, it will make arrangements to pay to any investors who are entitled to receive Lloyds Bonus Shares under the terms of the scheme, the cash value of those bonus shares (again at the Offer Price to be paid by Sabadell).