Pru man rues tax switch
Sunday 10 August 1997
Last week the Prudential followed the route pioneered by Allied Domecq, which was the first company to opt to pay a FID as a result of tax changes in the Budget.
Smaller shareholders, notably those owning shares in PEP plans, suffer severely when companies opt to pay a FID rather than a conventional ordinary dividend. For FIDs do not carry the 20 per cent tax credit available on conventional dividends, which PEP holders and other non-taxpayers can reclaim and which give PEPs their advantage.
In contrast, companies opting for FIDs reduce their own overall tax bill through reclaiming advanced corporation tax (ACT). And as a result of the last Budget, it now makes no difference to the big pension funds, the owners of major chunks of the Prudential, Allied and other listed UK companies, whether a dividend is a conventional one paid out of UK profits or a FID.
"We had a debate at board level and we decided that the benefit to the company and shareholders as a class far outweighed the cost to small shareholders," said Mr Bloomer, adding that the move costs him personally since he holds Pru shares in his PEP.
There is considerable irony in the decision since the Pru itself is one of the largest PEP pro-viders. But the move, Mr Bloom- er said, is likely to save the company "tens of millions in tax".
Allied said last month that it will benefit by pounds 25m through paying a FID and thus being able to reclaim what is called "surplus" ACT paid in the past.
The Pru's decision underlines the current row over Gordon Brown's Budget announce- ment that he would scrap FIDs in 1999. At the same time, the Chancellor scrapped the ability of pension funds to reclaim the tax credit. Before that, pension funds did far better from receiving conventional dividends and companies were happy to oblige them. This was so even when it sometimes would have benefited companies to pay a FID and reduce their corporate tax bill.
Now that they are no longer disadvantaging their powerful shareholders, companies are rushing to pay FIDs and urging the Government not to scrap them.
"The problem lies in a tax regime that is not coherent at the moment," said Mr Bloomer. "They have made changes to one side of the equation without tackling the other."
- 1 Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 Israel's propaganda machine is finally starting to misfire
- 4 Zayn Malik on Israel-Gaza: One Direction singer bombarded with Twitter death threats after posting #FreePalestine
- 5 'Hello mum, this is going to be hard for you to read ...'
Sally Farmiloe dead: Howards' Way actress, and former mistress of Jeffrey Archer, dies aged 60
Women in Turkey have a laugh in public at the deputy Prime Minister's expense
Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
Disney heiress Abigail disowns her share of family profits in West Bank company
Australian model Robyn Lawley stages naked protest against huge coal mine seven times the size of Sydney Harbour
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...