Baltic Exchange sale – tax implications

It was announced in August that Singapore Exchange Ltd (SGX) had made an offer to purchase the entire share capital of The Baltic Exchange Limited (Baltic Exchange). This became effective on 8 November and payments are expected to be despatched to shareholders by 18 November.

We have summarised the main issues to consider from a tax perspective below. We have also prepared a more detailed factsheet, which can be accessed here.

SGX purchased the entire share capital of Baltic Exchange for a cash consideration of £160.41 per share (the ‘cash price’). In addition, a final dividend of £19.30 per share was declared (the ‘special dividend’).

The sales proceeds
UK resident individuals are subject to capital gains tax (CGT) on any chargeable gains arising on the disposal of their shares. With certain exceptions, after 6 April 2016 individuals are generally subject to CGT at 10% or 20%, depending on the individual’s level of income. The chargeable gain is normally the cash proceeds less the original cost of the shares. Any chargeable gain will be reduced by the annual exemption (if available), any available losses and any other reliefs.

UK resident corporate shareholders are subject to corporation tax on any chargeable gains; the current rate of corporation tax is 20%. Chargeable gains for corporate shareholders are calculated similarly to the above, although companies do not benefit from an annual exemption. Companies are also able to claim indexation allowance to reduce the arising chargeable gain.

Final dividend
UK resident individuals are generally subject to income tax on any dividends received. From 6 April 2016 no tax is charged on the first £5,000 of dividends in a tax year, but dividends within this limit continue to count in determining which rate bands other income falls into. Dividends in excess of this are taxable at 7.5%, 32.5% or 38.1%, depending on the individual’s level of income.

Dividends received by UK resident companies from UK companies are generally free from corporation tax.

The position for overseas investors may differ from the above. The UK and overseas tax position should be considered on a case-by-case basis, although our factsheet summarises the main issues to consider for non-UK resident investors.

For further information, please contact your usual Moore Stephens adviser.

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