Standard Life, the insurer, is planning to return £1.75 billion to its shareholders after the sale of its Canadian business for £2.2 billion.
However, experts have warned that there could be a tax charge on the recipients, so they need to take care when deciding how to receive their money. Times Money answers your questions.
As a shareholder, how much will I receive?
You should receive 73p per share. So if you hold 100 shares your return would be worth £73.
Is this a windfall?
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No. Standard Life is disposing of a business and handing shareholders back most of the proceeds. Since the company will be smaller without its subsidiary, the value of each shareholders’ stake will be correspondingly smaller, and this should be reflected in the share price. What they gain from the return of cash will be balanced out by a lower share price.
When will the return of cash take place?
Probably in early 2015, but there are hurdles to clear before then. First, Standard Life shareholders must approve the proposal for a return of cash at an annual meeting on October 3. Voting forms have to be returned by 6pm on October 1. Regulatory approval will also be required.
How will the payout be made?
It is expected that Standard Life will offer investors B or C shares. B shares will be bought back by the company for cash, giving investors a capital gain. C shares will pay a special dividend, after which the shares will be cancelled. This will be treated as income.
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Which is the better option?
That depends on your tax position, says Richard Hunter, of Hargreaves Lansdown, the wealth manager.
If you have not used your CGT allowance you can make a gain of £11,000 before starting to pay CGT, which is charged at either 18 or 28 per cent.
Under the income option your payout is expected to be taxed as dividend income, at either 10 per cent (effectively zero per cent with the accompanying tax credit), 32.5 per cent or 37.5 per cent.