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TonyTax
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I have some shares in HP (Listed as HPQ on the NYSE). The company

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I have some shares in HP (Listed as HPQ on the NYSE). The company is due to split into HP Inc and HP Enterprises next month. I believe that shares will be given on a 1:1 basis from HPQ to the new HP Inc company with no Tax implications. However HP Enterprises shares will be given as a share distribution in an unknown quantity at an unknown price. While this has no tax implications in most countries in the world I have heard it does in the UK. I believe the tax due will be at the rate for dividends rate adjusted for dividend tax credit so a basic rate will pay no tax and a higher rate will pay 25%. If this is true, should I gift all my shares to my wife who is a lower band tax payer, or just sell my shares and pay any capital gains taxes due?
Hi. If the HP Enterprises share allocation is treated as a dividend distribution for UK tax purposes, then you are right in that a basic rate taxpayer will have no liability in 2015/16 (but may in 2016/17 due to the dividend tax changes announced in the Summer Budget), but a higher rate taxpayer will. There have been several demergers along these lines in the recent past, Vodafone/Verizon being one. The documentation you get from the company will give you some information on the tax implications. As to your options, without figures as to the dividend value of the new HP Enterprises shares, it's impossible to say what your tax liability will be at the higher rate so if you want to take a belt and braces approach, giving the HP shares to your wife would seem to be a shrewd move as there will be no CGT implications. I'm assuming your wife has no HP shares of her own. However, you need to make sure that you get it done before the share register is closed and the changes applied to existing shareholdings as at a specific date. I hope this helps but let me know if you have any further questions.
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Customer: replied 2 years ago.

Hi, sorry for the delay. Thanks for your answer, I intend to gift these shares to my wife. However, you mentioned about tax liability, which I just want to check with you. She is currently on £36K salary, so just below 40% threshold, but the value of the shares is currenlty £46K. I know if I gift them to her she won't pay tax until she sells, but if HP are treating half the shares as a dividend (which I am led to believe they are), then the £23K dividend will take her above the threshold, she becomes a higher rate taxpayer, and thus will pay the same as I would. Am I correct in that assumption? Thanks!
The first £42,385 of income is covered by the personal allowance of £10,600 and the 20% tax band of £31,785. Higher rate tax starts at £42,386 in the current tax year, 2015/16. So, if your wife has an income of £36,000, then she has £6,385 of the basic rate band which can be used to tax £6,385 of dividend at the 10% dividend rate which will save £1,436.62 in higher rate tax £6,385 x 32.5% - 10% tax credit).
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Customer: replied 2 years ago.

ok, so here is another variation....what if I gift these shares to my Dad who currently lives in Switerland (and is a resident there, he has been there for 20 years)? I am just trying to avoid paying a whack of tax without selling them (which I know is the option to avoid all this, but then I pay CGT anyway). Unless you have another idea?
I don't have any idea other than using what's available of your wife's basic rate band. It's a problem I'd like to have. If you gift shares to your father, you will be treated as having sold them to him at their open market value and possibly making a gain with no cash to pay the tax. He could sell them tax free as his cost will be the value when you give them to him. There are also the potential Inheritance Tax implications of a gift. You should wait as long as possible to find out what each component of the demerger will represent as a proportion of the whole without missing the ex date.
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Customer: replied 2 years ago.

Got it! I thought my father would count as close family and because I haven't charged him, then I am not making any profit so not liable for tax. Get your point about inheritance although if I gift them to him, not sure how I'd be liable for IT when he dies unless he is still holding them....but I trust you :)

I wish I knew where to go for information on the demarger as it is due on November 1st, and as a share holder I've not recieved any information whatsoever.
If you died within seven years of making the gift, then its value will remain in your esate for IHT purposes, though after three years the potential IHT charge tapers away.

Let me see what I can find on the demerger and I'll get back to you. I know a few stockbrokers. In the meantime, you should contact the company head office in London and see what you can find out.
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Customer: replied 2 years ago.

Thanks, ***** ***** that and see if you find anything. I'll add credit...cheers
Most big companies have a "shareholders service" department.
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