Royal Dutch Shell - Potential Tax Savings Offer
Shareholders in Royal Dutch Shell are being offered the choice of receiving dividends in the form of 'scrip' - additional shares. This could give them tax savings compared with taking cash dividends. Shareholders have until 26 November to sign up for the December distribution otherwise they will continue to receive cash.
The tax consequences of the Shell scrip dividend scheme are different from those that normally apply under this type of arrangement because of Shell's share structure and the details of the scrip alternative. The proposed distributions will not be subject to income tax (as is usually the case with scrip dividends) and only liable to capital gains tax if the shares are then sold. The scheme replaces Shell's Dividend Reinvestment Plan (DRIP) where distributions are subject to income tax.
The new scrip dividend scheme will be most attractive to higher rate and additional rate taxpayers who do not hold their shares through an ISA or other tax shelter. It could also appeal to investors wanting to build up their stake in the company without incurring buying costs. The scrip dividend programme is less attractive to basic rate taxpayers who may prefer the simplicity of continuing to receive cash dividends. Scrip dividends will only be issued as A shares rather than the more commonly held B stock. Participation in the programme will therefore not only require taking a view on the merits of increasing the holding of Shell shares; investors will also have to consider the two sets of dealing costs on eventual disposal.
If you have a question about this change, please get in touch with Gavin Morton, Managing Partner on 0131 558 5800 or email gavin.morton@chiene.co.uk , or your usual Chiene + Tait contact.