Capital Gains Treatment | Demerger of Biffa Plc | Capital Gains Treatment
On 11 August 1997, the Company's share capital was reorganised and then consolidated whereby, for every 20 existing Ordinary shares of £1.00 each, shareholders received 19 new Ordinary shares of 655/19 pence each and 20 B shares of 38 pence each.
At the Annual General Meeting on 1 August 2000, shareholders resolved to cancel the B shares and, following an application to the Courts, the capital of the Company was reduced and the B shares were cancelled with effect from 1 November 2000.
Capital Gains Treatment
For the purpose of Capital Gains Tax calculations, the market values of the new Ordinary shares of 655/19 pence each and the B shares of 38 pence each on 11 August 1997 were 820 pence and 36.25 pence respectively. The base cost of the old Severn Trent shares held immediately prior to the Share Capital Reorganisation was apportioned between the new Ordinary shares of 655/19 pence each and the B shares of 38 pence each, in the following ratio –
| Ordinary shares of 655/19 pence each | 95.55% |
| B shares of 38pence each | 4.45% |
Further details, including a worked example, may be obtained from groupcommunications@stplc.com. However, if you require further information regarding the tax treatment of your shares in Severn Trent or are in any doubt about your taxation position you should obtain professional advice.
Demerger of Biffa Plc, Return of Capital by payment of a Special Dividend and Consolidation of Severn Trent Plc Shares
On 9 October 2006 the demerger of Biffa Plc was completed and, for each existing Severn Trent Plc share of 655/19 pence each held at the Record Time of 6.00pm on Friday 6 October 2006, shareholders in the Company received:
- one Biffa Plc share of ten pence each; and
- a Special Dividend of 165 pence.
At the same time as the demerger, every three Severn Trent Plc shares of 655/19 pence each were consolidated into two new Severn Trent Plc shares of 9717/19 pence each.
The Special Dividend was paid on 20 October 2006. At the same time, share certificates for the new Severn Trent Plc shares and the Biffa Plc shares were sent to shareholders.
Capital Gains Treatment
For the purpose of Capital Gains Tax calculations the base cost of the old Severn Trent Plc ("Severn Trent") shares held immediately prior to the demerger and share consolidation must be apportioned between the new Severn Trent shares and the Biffa shares received in the following ratio: new Severn Trent shares 78.7%, Biffa shares 21.3%. This is based on:
- the dividend ratio of one Biffa share for each old Severn Trent share held;
- the consolidation of the Severn Trent shares in the ratio of two new Severn Trent shares for every three old Severn Trent shares held;
- a fractional entitlement based on £14.34, by way of cash, for any fraction of a new Severn Trent share as a result of the consolidation; and
- the respective market values on 9 October 2006, determined according to normal CGT rules, of 1440.00 pence for new Severn Trent shares and 259.88 pence for Biffa shares.
For example if 1,000 old Severn Trent shares were held immediately before the demerger and share consolidation, with a previous base cost of £5.00 per share (a total base cost of £5,000) the base cost for CGT purposes of the 666 new Severn Trent shares held after the demerger and share consolidation would be £3,935 (less the fractional entitlement payment) and the base cost of the 1,000 Biffa shares received in the demerger would be £1,065. For CGT purposes the base cost of the new Severn Trent shares is adjusted to reflect any fractional payments received.
Please note that if the old Severn Trent shares were acquired in a number of transactions at different prices or if other Biffa shares are owned, the determination of the base cost of the shares sold will also depend on the CGT matching rules. If you are in any doubt about your taxation position you should obtain professional advice.
