Autumn Statement 2014: Anti-avoidance: special purpose share schemes

Before the Autumn Statement, companies were able to issue new classes of shares to their existing shareholders by way of a bonus issue and then arrange for the shares to be repurchased at par, usually after a relatively short interval, with the result that shareholders were treated as having received a return of capital, instead of income. A number of listed companies were using such arrangements, often known as “B Share Schemes”, instead of paying dividends to their shareholders.

It has been announced that, where an individual shareholder is offered the ability to receive shares under one of these B Share Schemes in lieu of a dividend, the amounts received under the schemes will no longer be treated as capital, but will be taxable as if they were dividend distributions.

These changes will affect higher and additional rate taxpayers, who have been able to save tax on distributions from listed companies which use such B Share Schemes. It is unlikely to affect private companies reorganising their share capital.