LON:PHAR | SOCO Return Of Cash To Shareholders - Optimal Share Scheme For ISA?

31st Aug '13 by mpat89

12 comments 12668 reads

Hi, just a quick one. Believe I'm in line for participation in this share scheme like a number of others. (http://www.stockopedia.com/share-prices/soco-international-LON:SIA/news/rns/130829sia6912m.htm/?title=circular-proposed-return-of-cash-to-shareholders)

Looks like we have options: a) Income or b) Capital for the share scheme.

Are there any implications to either to be aware of? For example, would the income scheme be a 40p gross dividend resulting in a 10% tax deduction? etc. I'm holding in an ISA and just want to make sure I don't pay any unnecessary costs.

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Mpat89

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Chartered Accountant

12 comments

nigelpm

31st Aug '13

Just look on ADVFN or TMF - gengulphus has explained all.

omh

10th Sep '14

All my long term holdings are in my ISA, so makes no difference to me. Short term I use CFDs, so again no difference (effectively I take the income option). But I wondered idly the other day if either option was better for the Company in any way, so I asked.

Reply from Carol Fan tells me that, although there is no difference as far as the Company is concerned, those taking the Capital option use up what she terms "good tax capital" and, once that is exhausted (or, rather, there is insufficient to offer the option to ALL shareholders), then other methods would have to be investigated - which might mean a move to dividends.

But since it makes no difference to me, then I will opt for the income option as this allows the maximum flexibility for the Company and may be advantageous to one or more of my fellow shareholders.

Doubt this will be of anything other than passing interest to anyone, but since I had my question answered, thought I'd share and this long forgotten thread seems most appropriate place to post it

OMH

emptyend

10th Sep '14

If you hold in an ISA as I do, then just do nothing. You will get the default option, which is the dividend/income (untaxed in an ISA) and the company will retain some tax capacity. 70% took the income option last year.

patterbu

11th Sep '14

If you live overseas and are not subject to UK Capital Gains Tax>> take the Capital Option

Phil

omh

11th Sep '14

If you hold in an ISA as I do, then just do nothing. You will get the default option, which is the dividend/income (untaxed in an ISA) and the company will retain some tax capacity.

Not necessarily true......from an offboard reply to my post on TMF, Alliance Trust Savings default is for Capital, not Income which, as the Fool points out, is a waste of "good tax capital". He could have misread their communication, of course...any other ATS ISA or SIPP holders able to comment?

OMH

emptyend

12th Sep '14

OMH - this board specifically discusses SOCO International (LON:SIA) so my comment about the default option related specifically to SOCO International (LON:SIA).

omh

12th Sep '14

OMH - this board specifically discusses SOCO International (LON:SIA)

So sorry. Thought the title of the thread included

optimal share scheme for ISA?

and I was merely trying to pass on some info that I considered might be of (marginal) benefit to some. Your reply was incorrect - specifically in relation to SOCO held in ATS nominees. Was that also not worth pointing out?

OMH

emptyend

12th Sep '14

In that case you could have been clearer that you were talking about a nominee situation. I read your comment as referring to a completely different scheme.

It is very clearly a mistake by ATS nominees - but I suspect that any holders through them would be well-advised to double-check what they intend to do. Similarly anyone else whose broker has the wrong default option.

The offer to shareholders from the company is totally clear as to the default option - but if an intermediary has cocked it up then the contractual position might be less certain.

IIRC a couple of nominees made exactly the same mistake last year.

omh

12th Sep '14

The thread title is about ISAs - which by default are held in nominees
I started my initial post by saying all my holdings were in an ISA - therefore in nominees
Whether held in nominee form or not then if it makes no difference to the holder (basic rate tax payer who does not use CG allowance) then taking the Income Option makes sense
It appears at least one nominee HAS got it wrong
You say yourself that a couple got it wrong last year

Sheesh - I was trying to be helpful and I should have been clearer?

Won't bother my arse in future

OMH

emptyend

12th Sep '14

Up to you. Perhaps I'll do likewise.

I had never heard of that company as a nominee in relation to SOCO International (LON:SIA) shares - but I had heard of Alliance Trust and assumed you were talking about some previous scheme of theirs.

My misunderstanding.

MadDutch

14th Sep '14

My understanding is, thanks to Gordon Brown, that dividend income into an ISA is taxed at source, at 10%.

I have therefore opted for the capital option.

There is no limit to the amount of capital gain that can be made in an ISA, it is all tax free.

peterg

14th Sep '14

No. At one time dividends from shares held in PEPs could reclaim a 10% "tax credit". That was a notional sum that was presumed to be a repayment of a proportion of the advance corporation tax paid by the company. There is, however, no actual tax deduction from dividends, they are simply assumed to be tax paid for basic rate tax payers. So there is no tax advantage for you in taking the capital option in an ISA - just a small reduction in the what the company can pay out in the future in the form of a capital return.

Peter

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SOCO return of cash to shareholders - optimal share scheme for ISA?

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Mpat89

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