Return of capital from shares and CTC

A question about : Return of capital from shares and CTC

I asked this on another board but I'll ask the same question here as this is the Tax Credits area.

I have some standard life shares and as the result of return of value from them selling their Canadian companies I will get about Ј850 back (which I don't really want). I get child tax credits will this be seen as income so reduce the amount I will be entitled to next year, even thought it's effectively getting my own money back, my share holding will reduce by the same amount? Will it make any difference if it is taken as capital or income (B or C shares)?

It's all a bit confusing, I was keeping the shares for when I retire.

Best answers:

• I don't know anything about CTC and what would or wouldn't impact on them...
  This is from the Telegraph...
  The deal will be one known as a B/C share arrangement. You choose to receive the benefit in the form of either B shares or C shares. If you go for the B option, you'll receive bonus shares which in due course will be bought back by Standard Life. So that will count as receiving your benefits in the form of capital.
  If you opt for the C option you will receive a one-off special dividend in the form of cash.
  Why would I choose one form of payout over the other?
  Tax. Most individual shareholders won't have to pay tax if they receive the benefit in the form of capital, because the sums would be too small to exceed the annual capital gains tax exemption, currently Ј11,000. But tax would probably be payable in most cases if investors went for option C, where payments would be treated as dividend income.
  For most investors who don't hold their shares inside an Isa the option B is likely to be better from a tax standpoint. But everyone's circumstances will be different.
  If I go for option B, can I keep my bonus shares?
  No. They exist purely for the purposes of returning capital to shareholders so you can't keep them or trade them.
  What if I hold my shares in an Isa?
  No extra tax will be payable.
  What will happen to my existing shareholding?
  After the deal you will end up with fewer shares overall, but their value will be higher – so the worth of your holding will be maintained.
  Option B it would be capital
  Option C would be income
  That's how I read it anyhow....
• This link might help ( a bit!). Scroll down to income>
  https://www.gov.uk/government/upload...13/wtc2_1_.pdf
  However, it is probably best to telephone tax credits and ask.