Announcement by
BlackRock Energy and Resources Income Trust plc
Adjustment to Net
Asset Value of BlackRock Energy and Resources Income Trust plc
(LEI:
54930040ALEAVPMMDC31)
Summary
The Board of BlackRock Energy and Resources Income Trust plc
(the ‘Company’) is pleased to announce a positive adjustment
of 126 basis points to the net asset value (‘NAV’) of the
Company as at 25 June 2020 due to the
recognition of an expected receipt of tax reclaims for a value of
£945,614 on foreign income in the Company’s accounts, as explained
below.
Background
The Company’s investments include shares issued by both UK
companies and non-UK companies. Until 2009, while dividends paid to
the Company by UK companies were not subject to UK corporation tax,
dividends paid to the Company by non-UK companies were subject to
UK corporation tax, although credit could be given for any
withholding tax suffered. A number of cases challenging this
difference in treatment, on the basis that it was illegal under
European Union law, were commenced against the UK tax authorities
(‘HMRC’). In particular, litigation was commenced in 2003 in
the UK High Court and a claim brought by The Prudential Assurance
Company Limited ultimately became the test case.
The Company took a number of measures to protect its investors
in relation to this matter, including filing tax returns for
accounting periods to 30 November
2007, 30 November 2008 and
30 November 2009 (the ‘relevant
accounting periods’) on the basis that foreign dividends were
exempt from UK corporation tax and, in 2018, filing statutory
claims for double tax relief.
On 25 July 2018, the UK Supreme
Court handed down its judgment in the Prudential case, ruling that
dividends on non-UK portfolio shareholdings were taxable but that
credit should be given for the underlying foreign tax at the
foreign nominal corporate income tax rate of the source country.
This decision, and the potential impact of this on the Company’s
NAV was previously referred to in the Chairman’s statement
contained in the Company’s Annual Report and Financial Statements
for the year ended 30 November
2018.
The Company has now received correspondence from HMRC accepting
the entitlement of the Company to make a claim for double tax
relief in the relevant accounting periods in relation to underlying
tax suffered on dividends from non-UK companies. This double tax
relief reduces the corporation tax liability to nil for all periods
resulting in a repayment of the corporation tax suffered in the
relevant accounting periods. While the amount of the repayment has
not been formally agreed with HMRC, and as such a degree of
uncertainty remains, the Company now considers receipt of a
repayment is sufficiently probable that it should make an accrual
for accounting purposes to reflect such treatment.
The corporation tax refund expected to be received by the
Company following HMRC’s acceptance of the claims for the relevant
accounting periods amounts to £945,614.
The accounting rules applicable to the Company determine that an
uncertain tax receivable shall be accrued in the NAV of the Company
when, in the view of the Board, the successful future receipt of
such a receivable is probable. The Board’s current assessment is
that the future receipt of the tax reclaims described above is
probable and so meets this threshold.
For further information, please contact:
Melissa Gallagher
Managing Director
BlackRock Investment Management (UK) Limited
Tel: 020 7743 3893
Neil Morgan
WInterflood
Tel: 020 3100 0292