Gsk Share Discussion Threads

[minerve] 13/7/2015 16:37

Small company owners have the advantage of using dividend policy in order to mitigate tax for their own benefit. Employees cannot do that under PAYE. Small shareholders cannot do that with their ownership of a small holding in a FTSE 100 company, for example. Why should, therefore, small company owners have this tax avoidance facility when others don't? Many footballers and celebrities effectively use these methods to mitigate tax. For goodness sake, many small company owners are already 'on the take' as far as I am concerned, offsetting this and that for supposed business use when it is anything but.

[racg] 13/7/2015 16:10

For taxation purposes they are identical and this so called 'manipulation' what on earth are you on about. I think you've drunknthe kool aid if you think controlling your own dividend policy is 'manipulaton'. We ve gone from attacking tax evasion and corporate avoidance by the google fraternity, to taking small company owners more than under labour. Marginal rate of tax for a company owner is now 58% - very motivating. Not!

[minerve] 13/7/2015 15:59

A close company is completely different to a listed company because one can be completely manipulated to the benefit of the owner/small number of shareholders as it is not subject to close scrutiny or those rules dictating corporate governance. There are one or two exceptions where families are still able to manipulate dividend payments on listed companies such as ANTO, but these are few and far between.

[racg] 13/7/2015 14:45

I m not going to get into some long winded tirade back and forth about who is right. My opinion is the dividend change is/was a flagrant tax grab producing double taxation merely dressed up as being more fair because they tied themselves in such knots preelection when they did not expect to win. If this measure only applied to personal service companies I would not object so strongly. I cannot agree that a listed company is any different to a normal trading close company. I withdraw the use of claptrap. It was said somewhat angrily but those are my views.

[anhar] 13/7/2015 14:33

I will gladly agree to disagree. However you described most of what I said as "claptrap" so you might care to explain for the benefit of readers here where you think I'm wrong, because I don't want people to be misled by my comments. So where am I wrong, factually? There was little or no opinion in what I said, it was just facts I think.

Even if you were not referring to personal service companies and I was, that doesn't make what I said "claptrap" as far as what I said is concerned.

[racg] 13/7/2015 14:16

Claptrap barring the last paragraph. However, let's just agree to disagree. I m not talking about personal service companies, I m talking about small trading companies that employ and take risk. I wouldn't of minded if it was zeroed on personal service.

[anhar] 13/7/2015 13:58

Pay where is the qualitive difference between owning a trading business personally and having shares in a listed trading business?...

Simple. With personal service companies, the salary/dividend is entirely within the owner's control and the combination of those two forms of extracting income from the company can therefore be manipulated to minimise tax because divis attract lower taxes.

Holding a tiny minority of shares in listed companies as investments for the divis gives you no control over the amounts paid and certainly no salary element either.

There are other obvious differences too because the personal company is the owner's business in which they are engaged in earning the company's income. With listed investments, the small outside shareholder has no direct interest or influence at all in actually earning the company's income.

So the quality of the salary/divi from a personal company is very different to that of the divi from a listed company. I don't see much "qualitative" similarity.

Actually though there is a quantitative similarity in that the divis from both are taxed similarly, which brings me back to my earlier point that the budget attack on personal company divis, results also in an attack on listed share divis. It wasn't unintended though, it's fairly clear from the speech that they intended to raise taxes on very large dividend incomes from both sources.

[2hoggy] 13/7/2015 13:56

If you are retired as I am, having your dividend income in an isa away from the tax mans eyes is always very welcome,as in time you will make capital gains and it saves a lot of paper work informing him what your income is every year.

Wish I had put more in when I was younger,just my view on it.

[racg] 13/7/2015 13:48

Pay where is the qualitive difference between owning a trading business personally and having shares in a listed trading business?

None I would say.

It's double taxation pure and simple.

If he busted wanted to catch contractors with personal service companies he could of tightened irc35. It is a tax grab pure and simple. Do not try and say its for for business but not fair for listed investments. It is unfair to both.

[anhar] 13/7/2015 13:27

It appears that the budget changes were intended principally as an attack on those owner-managed companies because of their widespread use of dividends instead of salary to avoid tax.

But the result of the changes is also to increase tax on those investors with substantial dividend income from shares in quoted companies. Investing in quoted shares for dividend income has nothing in common with the sort of dividends drawn from personal companies for tax avoidance but the same rules apply.

With the existing system, it was something of an anomaly that dividend tax was a lot lower than the tax on other income such as wages or interest received. Even with the new rules, dividends will still be taxed at less than normal tax levels.

In an ISA, the same rules continue of no income or capital gains tax. For shareholdings of any size, it's probably still worth having an ISA provided it is a low fee one. Even if there is no immediate benefit, you never know in future if you may fall into a higher tax bracket or have a big gain and then you can't use the ISA limits for previous years.

[racg] 13/7/2015 12:19

No its not, it is improving the benefits of owning an isa. I ve got dividends outside isa s and pensions and that is really annoying me.Unless you are upset those with very small dividends are getting a pitiful £5k allowance. You get that allowance too, you know. People with close companies across the nation have been mugged by Gideon.

[dr biotech] 13/7/2015 11:39

This could be relevant to a few on here. My dividend income is about 4-5k a year but all in ISAs - its reducing the benefit of owning an ISA for the averagely well off.

[jadeticl3] 12/7/2015 21:55

Scottishfield,

Thanks for your contribution! I sometimes forget what I was about to say!!!

[greenpastures2] 11/7/2015 12:51

Companies should only pay a dividend if they have not got a better use for the money. The new budget rules on dividend taxes will align the UK with the US. There companies tend to pay dividends sparingly because of double taxation. It is a major reason why buy backs are used more often in the US than the UK.

[hpcg] 09/7/2015 16:14

Earnings yield is more important than distribution yield in any case.

[dr biotech] 08/7/2015 17:00

I think its a good thing sometimes. Aviva used to have a high yield and everytime the results came around the focus was solely on the dividend - this lead to a lot of speculation and column inches and I think it took the focus off the results. They cut it to a more sustainable level and the share price has performed strongly.

I'm not saying that it would be the same with GSK, but if its becomes close to unsustainable cut it.

[essentialinvestor] 08/7/2015 16:54

Appreciate that perspective and many are in a similar position,
GSK will want to buy out the remaining Novartis OTC stake imv
and that will require a big investment.

I can see the longer term potential here, not currently holding.

[anhar] 08/7/2015 16:26

I'd certainly view it as negative if they "rebase", a sleazy euphemism for cut, because I only invest in shares for income. In line with my strat, I wouldn't sell unless such a cut drops the yield to the FTSE but I certainly would not be pleased about it because it would hit my income.

Cuts are the risk I take for investing in shares for income but I see nothing positive about them at all. I don't believe in trading lower divis for growth for two reasons. First, I don't care about share prices and second even if I did, I have no faith that cutting the divi would produce a measurable trade off in share price growth.

The difference between GSK and those others you mention is that I don't think that TSCO etc made a similar commitment to a certain divi figure for a three year period as GSK has done. So I'd guess it is much more likely than not that GSK will stick to their plan. In any event there's little point in speculating about it for me, because it doesn't influence my reasons for holding or selling the share.

[essentialinvestor] 08/7/2015 12:57

Rebasing of the dividend in 2016 IMV, as per TSCO, CNA, SBRY... it's a long list.

Just to add I would not view it as a negative development if in the context of an
enhanced growth orientated strategy, this is speculation on my part.

[anhar] 08/7/2015 12:07

I've got no interest in brokers' views. No divis are guaranteed but I'm inclined to believe the GSK 80p three year commitment plus the 20p special for the first year. That makes a yield of about 5.9% at 1,347p even without the special, which is a big premium over the FTSE.

Whatever happens though I'll stick to my income strat and hold GSK until its yield falls to the FTSE or forever, whichever comes first. Even my own beliefs about the GSK commitment are irrelevant to the strat.

[essentialinvestor] 08/7/2015 10:21

The Liberum take on GSK is interesting.

The central theme is that the status quo cannot be maintained, the dividend
commitment over 3 years may lack credibility given the number of times GSK
has not delivered on targets.

They appear to see a dividend cut as part of a new strategic plan giving GSK more
flexibility to acquire, for example, the remainder of Novartis's stake in
the OTC business and further invest in their franchises to drive growth.

[tradermichael] 08/7/2015 08:01

Let's face it, the European experiment has failed - political, economic and social