Stock dividends: IT treatment
ICTA88/S249 - S251
Usually a bonus issue of shares is not income in the shareholder’s hands. But ICTA88/S249-ICTA88/S251 treat a stock dividend as income if it is received by
- an individual
- the personal representative of a deceased person
- the trustee of a discretionary trust.
If a stock dividend is treated as income the main features of the scheme are as follows.
- The taxpayer is treated as having received after tax an amount called the appropriate amount in cash which is grossed up in computing their income.
- The taxpayer is liable to Higher Rate Tax on the grossed up amount but cannot claim repayment of any of the Income Tax treated as paid.
- Generally the company does not have to account for Advance Corporation Tax on the payment, see CTM17005+.