Redemption of Rolls Royce C-shares

Accounting treatment: revenue or capital?

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Company holds a portfolio of investments, including Rolls Royce shares. Instead of regular dividends, they make payments to shareholders in the form of redeemable preference shares - 'C' shares.

If the company opts for redemption each year, I'm happy that they are capital for tax purposes. But what about the accounts? They are issued in lieu of cash dividends, so I'd have thought they should be shown as income, with an adjustment in the tax comp.

Substance over form - would welcome any thoughts...

Replies (4)

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By johngroganjga
15th Sep 2018 10:20

Yes they are income. Where else did you think the credit entry might go?

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By the_drookit_dug
15th Sep 2018 10:29

Realised gains? Would look odd though as the C Shares have no base cost.

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By johngroganjga
15th Sep 2018 11:54

I meant that the receipt of the scrip dividend was income. Any subsequent disposal would follow normal rules. The base cost of the shares acquired will be the amount recognised as income on receipt.

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RLI
By lionofludesch
15th Sep 2018 18:26

Yes - in essence, the company has

1. received a dividend

2. used it to buy shares (albeit without much of a choice)

3. sold the shares.

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