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Where Taxpayers and Advisers Meet

Foreign Dividend as return of capital

s445203
Posts:8
Joined:Thu May 02, 2019 9:00 am
Foreign Dividend as return of capital

Postby s445203 » Wed Nov 20, 2019 6:26 pm

Realise this is pretty technical in nature, but would appreciate any views on the below.

I'm considering buying shares in a listed US company (Norton LifeLock). The business will in a few months' time distribute c. 50% of today's share price as a special dividend. This dividend will be treated as a return of capital for US tax purposes and as such does not constitute income. However, as a UK shareholder, can I use that argument with HMRC and treat the dividend as a reduction in the CGT cost basis? GIven it's a US business, who decides for HMRC as to whether the dividend is income or return of capital? If the process of proving this to HMRC is too onerous I should stop thinking about buying these shares outside of an ISA or SIPP - it doesn't make any investment sense is the div is treated as income.

Many Thanks in advance.

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: Foreign Dividend as return of capital

Postby jerome.lane » Thu Nov 21, 2019 10:25 am

The likelihood is that a special dividend will still be treated as income for UK tax purposes. The Dr Pepper takeover are a case where the special dividend was treated as part income and part capital. You will have to take specialist advice from a UK perspective rather than rely on the US tax treatment. It sounds like if you can do this through an ISA that's the route to take to have certainty. Will your ISA provider allow the investment and are the shares listed on a recognised stock exchange?
Jerome Lane
Tax Adviser
Telephone: 07943 005902

s445203
Posts:8
Joined:Thu May 02, 2019 9:00 am

Re: Foreign Dividend as return of capital

Postby s445203 » Fri Nov 22, 2019 9:58 am

Thanks Jerome - that makes it more mirky than it's worth, so I'll go the ISA route. Thanks for taking the time.


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