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HMRC internal manual

Stamp Taxes on Shares Manual

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HM Revenue & Customs
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Depositary receipt and clearance services: scope of 1.5 per cent charge: Stamp Duty Reserve Tax - mandatory stock dividend

A stock dividend (or scrip issue, or scrip dividend) commonly represents an offer by a company to issue securities to its shareholders in place of a cash dividend.

A mandatory stock dividend payment to a shareholder is always in the form of newly issued shares out of the company’s share reserve, proportionate to the holder’s entitlement. A shareholder is not permitted or allowed to take dividends in the form of a cash payment.

No stamp duty or Stamp Duty Reserve Tax (SDRT) charge at the rate of 1.5 per cent arises where a mandatory dividend share is issued and simultaneously delivered to a depositary receipt issuer or clearance service located anywhere in the world.

See STSM054020.

A specific intention to subscribe for a mandatory dividend share in a United Kingdom incorporated company for consideration in money or money’s worth, for simultaneous delivery of the share to a depositary receipt issuer or clearance service anywhere in the world is not subject to a 1.5 per cent charge, for the reasons outlined in STSM055070.

Any appropriation or deposit of a mandatory stock dividend share in a United Kingdom incorporated company to a depositary receipt issuer or clearance service is, however, subject to a 1.5 per cent charge, calculated by reference to the market value of the securities at the time of appropriation by virtue of FA86/S93 (4)(c) and FA86/S96 (2)(c).