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HMRC internal manual

Capital Gains Manual

Stock dividends: CGT treatment: share reorganisation

TCGA92/S141 - for years up to 1997-98 - and TCGA92/S142 - for years from 1998-99 onwards - provide that if ICTA88/S249 (4), ICTA88/S249 (5) or ICTA88/S249 (6) has applied to a stock dividend, the taxpayer is treated as though they paid the appropriate amount in cash for the new shares. This is the amount taken into account for Income Tax purposes BEFORE the addition of the Income Tax treated as paid. Indexation allowance is given from the month the stock dividend becomes payable, if this is before April 1998, to the earlier of disposal or April 1998.