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HMRC internal manual

Savings and Investment Manual

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HM Revenue & Customs
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Dividends and other company distributions: stock dividends: the tax charge: cash equivalent

Meaning ‘cash equivalent’

ITTOIA05/S412 sets out the amount of the cash equivalent (in other words the net amount of the stock dividend income to be grossed up).

Subsection (1) deals with stock dividends within CTA20/S1049(1)(a) - an issue of share capital in lieu of a cash dividend. The cash equivalent of such share capital is the amount of the cash dividend alternative unless ITTOIA05/S412(2) applies.

ITTOIA05/S412(2) applies if the difference between the cash dividend alternative and the share capital’s market value equals or exceeds 15% of that market value. In that case, the cash equivalent is not the amount of the cash dividend alternative but rather the market value of the share capital.

Subsection (3) deals with stock dividends within CTA10/S1049(1)(b) - bonus share capital. The cash equivalent of such share capital is its market value.

Market value means the value on the date of the first dealing of listed share capital, or on the earliest date it was required to be issued.