Shell offers investors deal to avert tax threat

The Independent: Shell offers investors deal to avert tax threat

“The oil giant, Royal Dutch Shell, backed down yesterday in the face of protests…”: “However, the company was still criticised for coming up with the scheme too late to help hundreds of Royal Dutch shareholders who have already agreed to swap their old shares for ones in the new unified company, thereby triggering tax demands averaging £27,000.”

Wednesday 21 Sept 2005

By Michael Harrison, Business Editor

Published: 21 September 2005

The oil giant, Royal Dutch Shell, backed down yesterday in the face of protests over its financial unification from a group of UK private investors by announcing a new arrangement which will avoid them incurring tax bills running into tens of thousands of pounds.

However, the company was still criticised for coming up with the scheme too late to help hundreds of Royal Dutch shareholders who have already agreed to swap their old shares for ones in the new unified company, thereby triggering tax demands averaging £27,000.

The company said UK investors with Royal Dutch shares, as opposed to shares in Shell Transport & Trading, would be able to swap them for loan notes exchangeable into shares in the new company. This will allow them to roll over UK capital gains tax liabilities.

Previously, any UK holder of Royal Dutch shares who tendered them in exchange for new Royal Dutch Shell shares would have been deemed under UK law to have sold them, triggering tax on the capital gain.

There were an estimated 3,000 UK shareholders caught in this trap who collectively faced a tax demand of about £80m. Many of them were elderly investors or former Shell employees who had held the shares for years and relied on them to provide an income.

The Association of Private Client Investment Managers and Stockbrokers (Apcims), which took up their case with the company, said that about 1,700 of these had already tendered their shares and would have to sell about one- third of their holdings to pay the tax bill. But a further 400 who had held out would now benefit. These 400 shareholders are estimated to own about 2 million Royal Dutch shares between them and would have faced tax bills of nearer £80,000 had they tendered their holdings.

Angela Knight, the chief executive of Apcims, said: “We are pleased with Shell’s announcement. For the refusniks who held on to their Royal Dutch shares there is now something better on offer. But it is a great pity Shell didn’t offer this loan note facility from the start and make it available to all UK holders of Royal Dutch shares.”

A spokesman for Royal Dutch Shell replied: “Because it was a share-for-share offer we could not have offered loan notes from the start. That would not have been consistent with the principles of the offer, which was a complicated multi-jurisdictional issue.”

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