SAIM5150 - Dividends and other company distributions: stock dividends: introduction

바카라 사이트˜Stock dividends바카라 사이트™ are taxable as income

바카라 사이트˜Stock dividend바카라 사이트™ as a general term is often used to describe the case where a company, particularly a quoted company, offers its shareholders the option of receiving additional shares in lieu of a cash dividend, as bonus share capital (meaning no new consideration is provided to the company in return). This may be advantageous to the shareholder, who can avoid the dealing costs involved in buying fresh shares in the company, and may be preferable to the company which does not have to pay out cash. 바카라 사이트˜Stock dividends바카라 사이트™ may also be referred to as 바카라 사이트˜scrip dividends바카라 사이트™ or 바카라 사이트˜bonus issues바카라 사이트™.

Stock dividends as defined in the legislation are treated as income by virtue of CTA10/S1049, and taxable as savings income under ITTOIA05/PART4/CHAPTER5 S409 to S414.

Meaning of 바카라 사이트˜stock dividend income바카라 사이트™

ITTOIA05/S409 imposes a tax charge on 바카라 사이트˜stock dividend income바카라 사이트™. ITTOIA05/S410 defines 바카라 사이트˜stock dividend income바카라 사이트™ as arising if a UK resident company issues share capital in the following circumstances:

  • as a result of the shareholder exercising an option to choose whether to receive an ordinary cash dividend or additional share capital (CTA10/S410(1)(a)), or
  • in respect of shares which, under their terms (whether original or otherwise), carry the right to bonus share capital (CTA10/S410(1)(b)).

Not all bonus issues are stock dividends

The stock dividend rules do not apply to ordinary bonus issues that a company makes, which involve the capitalisation of reserves and allotment to shareholders of bonus shares pro-rata to existing holdings. Such bonus issues arise from a specific resolution and not from the terms of the shares themselves. CTM17005 explains this in more detail. From the point of view of the shareholder, the difference is that the higher rate income tax charge is under ITTOIA05/PART4/CHAPTER3 on distributions of bonus shares, and under ITTOIA05/PART4/CHAPTER5 on stock dividends. For tax years up to 2015-16, distributions of bonus shares were 'non-qualifying distributions' that did not attract dividend tax credits before these were abolished. See SAIM5050.Â