Your MoneyQ&A

I’m confused over whether I have tax liability on free shares

Tax position on your shares has changed down the years, as has the structure of your shareholding

Managing shares and tax can be trickier these days if you do not have online access. Photograph: Rafael Henrique/SOPA/LightRocket/Getty

Dominic Coyle's face
Dominic Coyle
Tue Mar 5 2024 - 05:15

Many years ago we were given free shares when Norwich Union changed hands – 352 Aviva shares to be precise. We used to get a certificate each year of dividend and withholding tax. This all moved online and I don’t receive this certificate any more.

Two dividends, which amount to about €100 in total, are paid into my account yearly. I no longer know whether tax is withheld or whether this €100 has to be declared to the tax office?

Additionally, in May 2022, shares were consolidated, and we received a few hundred euro and a new share certificate of 267 shares. I have no idea whether tax has been paid in relation to this. I am in my 70s and have no access to a computer, so I find it difficult to know what is involved in this process. I would appreciate if you can explain it for me please.

Ms A.S.

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Too many people these days assume that everyone is online, which as you say is not the case. There is an equally erroneous assumption that even where people do have access to the internet, they are comfortable in dealing digitally with matters regarding their personal finances and, more importantly, any responsibilities they have in relation to those.

Just because such comfort with online matters is true for many people, including many older people, does not mean it holds true for everyone. I know people in their 60s who would never dream of doing any financial business online.

You were among the 160,000 Irish customers and staff of Norwich Union, now know as Aviva, who received shares in the business when the mutual floated on the stock exchange in 1997. As you say, that’s a long time ago – 27 years this summer.

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Notwithstanding your discomfort with computers, you appear to be fairly well up on the various changes at the company and its shares over the years.

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You are correct that Norwich Union became Aviva in June 2009, and also correct that there was a share consolidation and return of capital in 2022.

In this latter event, you would have received just shy of €1.20 for each of the 352 Aviva shares you held at the time.

Dividends are considered income, and you do need to include them in an annual return of your taxes to the Revenue Commissioners

Your shares were also consolidated – with all shareholders going forward holding shares that amounted to 76 per cent of their previous holding. In your case your 352 shares became 267 shares, and you received a small payment for the additional fraction of a share.

So, where does all this leave you on tax?

The amount you received from Aviva in the return of capital would have been considered under the threshold for capital gains tax. In your case, the sum involved – a little over €420 – would have been well below the €1,270 in capital gains that you are allowed to make in any tax year without paying tax.

In relation to the dividends, there are two things to note. First, yes, dividends are considered income, and you do need to include them in an annual return of your taxes to the Revenue Commissioners. You will need to make a tax return even if you are and were otherwise a PAYE worker, as dividends are not taxed under PAYE but are still liable for tax.

The responsibility for notifying Revenue of the liability and paying it is yours.

Secondly, the situation in relation to dividend withholding tax has changed. When you first received these shares, the UK did impose dividend withholding tax and there was a convoluted process in claiming some of it back and offsetting the rest against any Irish tax liability.

However, this changed in 2016, when the UK removed dividend withholding tax. Any dividend received after April 6th of that year – the start of the UK’s 2016/17 tax year – will have been paid to you gross, ie without any tax deduction.

Revenue, like everyone else these days, is very keen to conduct all its business with you online, but that doesn’t mean you cannot choose otherwise

You say you have been getting dividend income of about €100 a year from Aviva. Assuming your income is high enough to qualify for income tax, you owe Revenue somewhere between €20.50 and €48 in income tax and universal social charge on those dividends. And from what you say in your letter, I suspect you might have some arrears owing to Revenue for dividends from previous years.

It’s not a lot of money from Revenue’s perspective but, for peace of mind, it is probably worth getting in touch with them.

Revenue, like everyone else these days, is very keen to conduct all its business with you online, but that doesn’t mean you cannot choose otherwise, especially in cases like yours where you have no access to a computer.

You are going to need to fill out a Form 12S (a shortened, simplified version of the Form 12 tax return used by PAYE workers with additional income). You should be able to get it from any tax office, but you could also write to the Collector General’s Officer at Collector General’s Division, Revenue Commissioners, Sarsfield House, Francis Street, Limerick, V94 R972.

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You will need one form for each year for which you now owe tax. On the form, which is generally self explanatory, you will fill in your Aviva dividend income in the section for gross amount in euro of other foreign income which is on page 7 of the colour-coded form (the page with blue boxes).

While you are at it, you can also claim relief on any health expenses owing to you for those same years, although you can only claim reliefs for four years prior to this year – ie, for the years 2020-2023.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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