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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Capital items that are income for tax purposes: Trust income: enhanced stock (scrip) dividend

If a shareholder takes up the offer of shares in place of a cash dividend, this is a stock (or scrip) dividend. The instructions are at CG33800 onwards. External customers can find this guidance at

Where the number of issued shares is deliberately set so that their market value exceeds the cash alternative, the issue is known as an enhanced stock (or scrip) dividend.

Statement of Practice SP4/94 sets out the tax consequences of an enhanced stock dividend in an interest in possession trust.

The tax treatment of enhanced stock dividends received by the trustees follows from the trust law position. Trustees who receive an enhanced stock dividend must decide whether, as a matter of trust law, they should regard it as income or capital.

HM Revenue and Customs can offer no guidance about the application for trust law in any particular case. However, we will accept whichever of the three approaches described in SP4/94 the trustees conclude that they should adopt, provided that their conclusion is supportable on the facts of their particular case.

There are instructions at CG33816. External customers can find this guidance at