Drip or Scrip?

Sweg

I have been offered the opportunity to elect for either the Drip or Scrip programme by Royal Dutch Shell PLC.
I am aged 67, what would be the best option and why?

DawlishDilbert

+1 with this question, although the form suggested the drip method isn't available yet.

cloud_dog

Sweg wrote: »

I have been offered the opportunity to elect for either the Drip or Scrip programme by Royal Dutch Shell PLC.
I am aged 67, what would be the best option and why?

Ummm, difficult one to answer because there are soooo many variables but, lets deal with the simple stuff first:

SCRIPT/DRIP...
SCRIPT is where the company create new shares to cover your dividend.
DRIP is where shares are purchased on the open market

So, the SCRIP shares will dilute the value of your existing holding if you don't take the SCRIPT shares (minuscule).

There may be advantages of one over the other regarding dealing costs also but I'd need to investigate further.

SCRIPT - You also need ot bear in mind that as a UK shareholder (I am assuming you are) you are liekly to hold 'B' shares (RSDB). All SCRIPT shares are issued as 'A' shares (RDSA); so you need to be cognisant that you may end up with two set of investments in Shell. This may or may not be a consideration for you (think dealing costs).

There were / are benefits in taking shares rather than the divi due to personal taxation but we need to bear in mind the recent changes in taxation.

One other primary personal difference might be consideration of your income tax band. If you are a high rate income tax payer then I believe you can take the shares, sell them and offset them against your capital gains tax rather than income (but we may need to re-consider this as above).

Soooo, lots to think about before deciding.

If its of any value, I have just advised my mum (pensioner) to keep taking the cash divi.

Sweg

Thanks ...

Mr_K

I would have been interested, however the scrip/drip dividend will only by A class shares (subject to Dutch tax), not the B share type which UK customers usually hold.

Glad I went for max Shell shares from the BG takeover, these have gone up from £14 to £18 a share since February :beer:

C_Mababejive

I was about to ask the same question. Shell are actually asking if you want to sign up for the scrip scheme and also an expression of interest in taking part in drip when they decide to introduce one.

Im guessing that if you really want more shell shares then a plan might be to take the cash and buy RDSB when it suits you?

I think im right that there is no tax benefit in opting for the scrip divi as it will still be considered taxable earnings even if it has been recycled into RDSA shares?

C_Mababejive

I have done a bit more googling and found this..

http://www.taxation.co.uk/taxation/Articles/2011/09/28/281031/sure-shell

I havent unpicked it all yet but am i right in thinking that if you hold RDSB and you elect to receive RDSA shares via the scrip divi, then the funds generated by the scrip divi are not treated as income for tax purposes?


ta

Daniel54

The scrip dividends are not liable to UK tax,which is why I have so far taken scrip dividends on the B shares and drip dividends on the A shares.

However from 6.4.2016 dividends up to £5,000 pa are exempt from tax so this advantage falls away and there would be no reason not to take the drip option

C_Mababejive

Daniel54 wrote: »

The scrip dividends are not liable to UK tax,which is why I have so far taken scrip dividends on the B shares and drip dividends on the A shares.

However from 6.4.2016 dividends up to £5,000 pa are exempt from tax so this advantage falls away and there would be no reason not to take the drip option

Unless you already receive more than 5k in divis...?

cloud_dog

Daniel54 wrote: »

The scrip dividends are not liable to UK tax,which is why I have so far taken scrip dividends on the B shares and drip dividends on the A shares.

The documentation stated that SCRIPT shares would be issued as RDSA shares and that they do not currently operate a DRIP scheme but may consider it.

C_Mababejive

The more i read about this the more confused i get. I am clearly suffering from financial terminology dyslexia.

So to keep it simple

Example

A person owns RDSB shares,

a)They earn more than 5k in divis and their total income exceeds the basic rate so they are in the higher tax bracket. Will taking the scrip divi lower total taxation?

b)The same person earns more than 5k in divis but is a basic rate taxpayer. Would taking the scrip divi lower their total taxation?



In either case, if they do take the scrip divi, i understand that the new shares will be A shares.


In the next round of divis, can you again opt for scrip divi on A shares?

If not, what is the tax treatment for those new A shares if you are a UK taxpater

a) at basic rate
b)at higher rate

Phew,thanks for any input which im hoping will clear it up for me and many others !