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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Share reorganisations: consideration paid: foreign stock dividends

You are most likely to see the operation of this rule in the case of stock dividendsdeclared by foreign companies. The company will declare a cash dividend but offer itsshareholders the option of taking up further shares instead of the cash. If a shareholdertakes the shares rather than the cash the company’s assets have not been reduced by payingout the cash. To the extent that the shareholders opt to take their dividend in shares,the effect is similar to a bonus issue for which no consideration is given and you shouldtreat it in the same way. There is guidance on the Case V treatment of such dividends atIM1612.