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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 2 share incentive plan (SIP): Types of award: Dividend shares: Payment of dividends where no requirement to reinvest

Cash dividends

Any cash dividends on plan shares which are not required to be reinvested (either because the company has not made a direction for reinvestment or the participant has not elected for it) must be paid over to the participant as soon as practicable (paragraph 69).

Non-cash dividends

Non-cash dividends cannot be reinvested nor be treated as dividend shares and must be passed to the participant as soon as practicable in accordance with the trustees’ obligation to pay over any money or money’s worth received in respect of any of the participant’s shares (paragraph 74).

In both cases the trustees must issue a voucher to each participant to whom a dividend is paid, which shows the amount of the dividend passed on and the associated tax credit in the normal way.