Statement re Adjustment to Net Asset Value

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: [phone]

Neil Morgan
WInterflood
Tel: [phone]