In April 2006, as a policyholder, I received 916 free shares in Standard Life. I also bought a further 1,075 shares at a discounted price of €3.16 (total €3,396.24). A year later I received 99 free bonus shares. Over the years, I reinvested my dividends in shares. In all, I bought 1,114 shares at an overall cost of €3,604.48.
So in March 2015, at the time of the Standard Life Return of Value, I held 3,204 shares and received €3,578.85 (UK tax of €354.65 had been deducted). I had requested this to be treated as capital but because of the postal mess-up, it was treated as income. I also received a new share certificate for 2,621 Ordinary Shares.
My query is how do I put a base price on these Ordinary Shares? Revenue has published a guide to the Tax Treatment of the Return of Value (not an easy read) but I cannot find any guidance as to the base price for dealing with capital gains in the future.
My second question is what is the significance of line 804 in Form 11 Tax Returns which states “If an election for CGT (rather than income tax) treatment on a return of value by Standard Life plc was received after the deadline set by the company due to delays in the postal system” tick the box? Is Revenue giving some consideration to those who got caught for income tax rather than capital gains?
Ms G.O’B., email
Answer:
To be fair to Revenue, their guidance on how to deal with the capital gains aspects of the Standard Life deal does provide information on how to calculate the base pice of the new, consolidated ordinary shares you now hold in the company. However, as their focus was on determining any capital gains tax liability from the return of value side of the arrangement – where Standard Life paid €1.02 for every share in Standard Life you originally held, it might not be immediately apparent.
The numbers can wreck your head but let me try to be straightforward. Before the consolidation of shares and return of value you had a total of 3,204 shares. Some you had paid for, others you received free. The total cost to you of building your stake in the company was €7,001.48.
After you had 2,621 new ordinary shares which Revenue states were trading at €6.52 each, valuing those shares at €17,088.92 in total.
You had also, Revenue says, received €3,268.08 in the return of value side of the deal – €1.02 for each of the 3,204 shares you held originally. I know this number differs from what you actually received but that is how Revenue has determined it for CGT purposes.
To work out the base cost of the new ordinary shares, you take your personal cost of buying your stake in Standard Life (€7,001.48) and multiply it by the post-consolidation value of your reduced number of shares (€17,088.92) divided by the the value of the shares and the payout under the return of value (a total of €20,357).
So 7,001.48 X 17,088.92 divided by 20,357 gives you €5,877.47. This is the new base value of your 2,621 new ordinary shares – or €2.24 a share rounded to the nearest cent.
On your second question, the Minister for Finance relented following a campaign by shareholders and provided in the 2016 Finance Act that anyone who opted to have their return of value treated as capital would have that choice honoured despite the postal glitch that saw many, including you, receive the money form Standard Life/Capita as income.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
