National grid shares help

EthicsGradient

C212 said:

The option I have selected is to sell the NGNP right and use the money to take up some of the rights issue (at £6.45 per share), i.e. the "tail swallowing" option.

At the end of the exercise I will have an additional ~900 National Grid shares. 

When filling out my annual tax return:

A)   Do I put the £5,805 (900 x £6.45) as dividends

   Do I treat the £5,805 as a gain (and pay CGT on the amount over the £3,000 limit).

C)   Do nothing until I sell the shares (and then pay CGT as due at the time).

Reading the HMRC guides, I think it might be option B but it isn't completely clear, so any advise would be gratefully received.

A ) No. The £6.45 is a cost, not a dividend.

B ) No. Again, it's a cost, not a gain (though it may be roughly equal to the gross proceeds of the sale you did to pay this cost - see below)

C ) There may be a CGT calculation this year, on the money obtained by selling some of the nil-paid shares - but that is not "£5,805". In section 10 on page 54 of 24-12356-25_c9 1..172 (nationalgrid.com) , it talks about CGT on the proceeds from selling (part of) your nil-paid shares. But it says that if the proceeds are deemed "small" - under 5% of the value of the existing shares, or under £3,000 - then you don't have to calculate CGT on it. But I'm not certain when that "value" is taken (or if it is with the dividend or ex-dividend). My calculation (which could be wrong, and I'd really like someone more experienced to check this, maybe multiple times, before anyone thinks this might be right) is that "tail swallowing" at the moment involves:
current price of existing shares with dividend = 846p
current price of nil-paid shares = 161p
If you had 2400 existing shares (worth £20,304), you got 700 nil-paid shares
If you sell 561 at £1.61 you get £903.21
That pays for making the 139 remaining shares "fully paid" at £6.45 = £895.55
903.21 / 20304 = 0.0445 = 4.45%, so below the "small" level, so you don't have to pay (or calculate) a capital gain this year (even if the "value of the existing shares" should be the ex-dividend value, that would be 903.21 / ((8.46-0.3912)*2400) = 4.66%, so still under 5%)

For a future CGT calculation when you do sell shares, the £903.21 is subtracted from your total cost, but the £895.55 should be added as a new cost. So if you'd bought those 2400 old shares at £5 each (£12,000 total), your net acquisition cost should become 12000 - 903.21 + 895.55 = £11,992.34. ie very little change overall.

Blossom38

This might be really silly questions but as I rarely buy shares I don't know what to do. I'm hoping someone with more knowledge will give me the answers.
I have Paper Certificates and if I take up the Rights Issue, will they send me Paper Certificates? I've tried reading the form that arrived this morning but it's all double Dutch to me!
Is it better to buy them online but then will Equiniti keep the Certificates?
Or do I just fill in the form that I have been sent with a cheque and they will send the Certificates?

Thank you

gatters

Blossom38, the online option at https://nationalgridrightsissue.equiniti.com/ can be used for paper certificates. You'll receive a new paper share certificate, according to the guidance note it will be dispatched on 24 June. 

Note: I have no expert knowledge/experience, this is just my understanding from reading the guidance. 

robe1810

I am an Exec for my late father's will and have Power of Attorney for my mother.  At lunchtime today I received PAL letters for them both.  Whilst I think I understand the options, as the intention was to sell my father's shares before I received this letter I am inclined just to do nothing.  My mother's total of new shares would be 565 and it is the dilution of dividend that I don't understand if I don't take up all her rights.  

xyz123

wmb194 said:

At the moment the rights are selling for roughly 200p each.

https://www.londonstockexchange.com/stock/NGPN/national-grid-plc/company-page

Hi, can I please ask how can anyone buy these nil Shares from those who don't want it?

Thanks 

wmb194

xyz123 said:

wmb194 said:

At the moment the rights are selling for roughly 200p each.

https://www.londonstockexchange.com/stock/NGPN/national-grid-plc/company-page

Hi, can I please ask how can anyone buy these nil Shares from those who don't want it?

Thanks 

A stockbroker. Not all will offer nil-paid rights, though. I don't know but you could try the likes of AJ Bell and Hargreaves Lansdown.

TUVOK

I've just checked the closing prices for yesterday and more drop's in the price of NG shares.
NG finished at 834p and the rights issue for myself of 503 shares fell to 149p, so getting harder at least for me to decide what to do
Like many other members, rights issues are difficult to understand and although I've dealt with a few this one is very hard to determine what to do.
What is the current thinking if there are even more drops in price for today and tomorrow?

Twishyblue

I only have 86 shares many years ago which was given to me.  I have never purchased any shares so the Allotment Letter was confusing, but thanks to Ethics-gradient post understand it a little more.  I am thinking should I be brave and purchase the new shares at a cost of £161.25 for my grandchildren (future) and if so the payment needs to be by cheque, I no longer possess a cheque book. If I do not purchase I do realise I will eventually loose the opportunity but will I be able to retain my original 86.  I hope I have explained my questions okay and would be grateful of any direction. I have u til 10 June to decide 

C212

EthicsGradient said:

C212 said:

The option I have selected is to sell the NGNP right and use the money to take up some of the rights issue (at £6.45 per share), i.e. the "tail swallowing" option.

At the end of the exercise I will have an additional ~900 National Grid shares. 

When filling out my annual tax return:

A)   Do I put the £5,805 (900 x £6.45) as dividends

   Do I treat the £5,805 as a gain (and pay CGT on the amount over the £3,000 limit).

C)   Do nothing until I sell the shares (and then pay CGT as due at the time).

Reading the HMRC guides, I think it might be option B but it isn't completely clear, so any advise would be gratefully received

C ) There may be a CGT calculation this year, on the money obtained by selling some of the nil-paid shares - but that is not "£5,805". In section 10 on page 54 of it talks about CGT on the proceeds from selling (part of) your nil-paid shares. But it says that if the proceeds are deemed "small" - under 5% of the value of the existing shares, or under £3,000 - then you don't have to calculate CGT on it. But I'm not certain when that "value" is taken (or if it is with the dividend or ex-dividend). My calculation (which could be wrong, and I'd really like someone more experienced to check this, maybe multiple times, before anyone thinks this might be right) is that "tail swallowing" at the moment involves:
current price of existing shares with dividend = 846p
current price of nil-paid shares = 161p
If you had 2400 existing shares (worth £20,304), you got 700 nil-paid shares
If you sell 561 at £1.61 you get £903.21
That pays for making the 139 remaining shares "fully paid" at £6.45 = £895.55
903.21 / 20304 = 0.0445 = 4.45%, so below the "small" level, so you don't have to pay (or calculate) a capital gain this year (even if the "value of the existing shares" should be the ex-dividend value, that would be 903.21 / ((8.46-0.3912)*2400) = 4.66%, so still under 5%)

Thanks for the explanation.  You can work it though to get an equation for the fractional gain.

If "m" is the price (in £) you get paid for the nil-paid shares and "n" is the current price of existing shares (in £) with dividend, then the fractional gain is given by

            7/24 x (6.45 /(m+6.45)) x m /n

For your example with m=1.61 and n=8.46 you get 0.044, so 4% so than the HMRC "5%" criteria.

xyz123

wmb194 said:

xyz123 said:

wmb194 said:

At the moment the rights are selling for roughly 200p each.

https://www.londonstockexchange.com/stock/NGPN/national-grid-plc/company-page

Hi, can I please ask how can anyone buy these nil Shares from those who don't want it?

Thanks 

A stockbroker. Not all will offer nil-paid rights, though. I don't know but you could try the likes of AJ Bell and Hargreaves Lansdown.

Thank you. A laymen's question. The price of rights at 200p is basically 200p for rights +645p for actual shares so total 845p or have I got this wrong?