UK private investors are being hit with unnecessary tax bills as corporate restructuring and M&A activity is being carried out to leave them...

UK private investors are being hit with unnecessary tax bills as corporate restructuring and M&A activity is being carried out to leave them with income, taxed at a maximum of 40 per cent, rather than a more tax-effective capital gain, according to a recent report in the Times. The latest to follow the trend which is causing outrage among UK investors is the Hilton Group with its £3.3 billion ($5.7 billion) sale of its hotels to America's Hilton Hotels Corporation, said the report. The sale prospectus discloses that: "it is possible that any return of cash to shareholders will be in a form that would be taxed as income, rather than capital, in the hands of shareholders". In a statement, Hilton said: "This decision will consider the best interests of the company and the shareholders as a whole. Inevitably there are different implications for the various categories of shareholders.” Hilton is not the only company to fly in the face of investors’ fiscal best interests, said the Times report. Last year BPB shareholders were left with a £25 million capital gains tax bill as a result of the £3.9 billion takeover by Saint-Gobain. And a capital restructuring at Shell left 3,000 shareholders with a £77 million billion tax bill. Corporates could avoid investor tax pain by offering alternative B shares or loans notes which can spread the cost over time, although these can be costly to administer and take-up can be low. In response to the growing problem, The Association of Private Client Investment Managers and Stockbrokers has written to all chairmen in the UK’s FTSE 350 urging them to take into account investor tax bills arising from large transactions, said the report.