Shareholders in Standard Life will not be pursued by Revenue for tax on the "return of value" earlier this year after Minister for Finance Michael Noonan did a U-turn on the issue.
Thousands of Irish investors in the British insurer were left with the prospect of a significant tax bill after their forms got lost in the post.
The issue arose after the company chose to give money back to shareholders following the sale of its Canadian business for £2.2 billion in 2013 in an exercise that also saw it implement a consolidation of its shares so that investors received nine new shares for every 11 previously held.
Shareholders were offered the choice of receiving the money as income or capital. Income was the default option where no choice was made by the March 18th deadline.
The payout in March last amounted to 73p (almost €1) per share. The average holding of Ireland’s 60,000 Standard Life shareholders was 675 shares. Some hold considerably more, and many of those were among the 11,200 who contacted the company to elect to receive their payout in a way that would ensure they paid little or no tax on it.
However, fewer than one in four of those who sent their replies by post met the deadline. Standard Life accepts all the letters were posted well in advance of the deadline. In all, around 5,300 Irish shareholders were affected.
As a result, they were liable to tax at up to 52 per cent – income tax at up to 40 per cent depending on their marginal rate, PRSI of 4 per cent and universal social charge (USC) of up to 8 per cent – rather than capital gains of 33 per cent, or nothing if their payment was less than €1,270.
An Post and Royal Mail conceded that several batches of letters had got delayed in the system but were unable to identify here. It is understood that the problem affected only shareholders in Ireland.
Back in May, in a reply to a parliamentary question, Mr Noonan said he did not intend to grant relief to Irish shareholders in Standard Life, stating that the circumstances differed from those of Vodafone shareholders whom he did accommodate in last year's Finance Bill after a similar mix-up in 2013.
At the time, he stated: “I am not convinced of the appropriateness of the State, as a matter of practice, addressing by way of legislation the difficulties of shareholders in commercial public companies arising from a failure either to make decisions in relation to their commercial investments, the timely communication of decisions or arising from problems caused by administrative arrangements.”
However, he said he would continue to be advised by my officials, in liaison with the Revenue on the issue.
In the Finance Bill, published Thursday, he has included a measure to ensure that people who opted to receive their payment as capital rather than income so as to reduce or eliminate any tax bill will have that choice honoured by the Revenue, despite the postal glitch that saw the payments made by Standard Life as income.
Section 66 of the Bill states that anyone who elected to take their payment from Standard Life as capital via the issue of B shares will be deemed to have received the payment under those terms.
The provision specifies that anyone looking to claim relief under the Finance Bill will have to prove “to the satisfaction of the Revenue Commissioners” that the form was completed and signed by the shareholder before the deadline imposed by Standard Life but received by the company in the mail after the deadline.
