Spring 2006 Newsletter Content U-Turns Galore Premises, Promises Filing Bonus RIP: 0% Rate His and Hers Party Spirit State Of The Union VAT's The Point? Going Dutch Away Win For Revenue WIP-Round The Best Land Plans Tax Free Gizmos Where Theres A Will Do You Work Here? Out Of The Shadows Sacrifice Works Home Sweet Office Sauce For The Goose Blissful Ignorance PC Or Not PC? Lost On Penalties Worth The Paper Carry The Can

Going Dutch Last year, Shell Transport and Trading and the Royal Dutch Petroleum Co finally tied the knot and became a single company instead of two separate holding companies for the same underlying business. Holders of Royal Dutch shares received "A" shares in a new company, Royal Dutch Shell plc, and holders of Shell T&T shares received "B" shares. These new shares are identical in rights, except that the "A" shares are treated as if the income comes from the Netherlands for tax purposes. As if that wasn't complicated enough, the swapping of one set of shares for another on this sort of company reorganisation is usually ignored for tax purposes - and so it was for the Shell shares becoming new "Bs". But the Inland Revenue announced that exchanging old Royal Dutch for new "As" would trigger a CGT liability. The reason for this is very obscure, and the companies chose to ignore it - and the tax charge they were creating for some of their shareholders - until long after the merger had been approved. Finally they decided to offer a "loan note alternative" which would allow people to delay the CGT charge until they sell their investment - but that was only available to people who had not yet accepted the standard reorganisation terms. That was the 1.5% of Royal Dutch shareholders who had stood out against the transaction, or who simply hadn't answered any of the letters they received. So those investors who had believed the company's statements - that no better deal was coming - were left having to pay tax. Company takeovers and mergers can make you capital gains, which is the good news; but then you can have to pay tax on them, which is the bad news. If you receive circulars from companies you have invested in and you are wondering what the tax implications are, we will be happy to investigate for you.