Stock dividends
249Stock dividends treated as income
(1)Subject to subsections (7) to (9) below, this section applies to any of the following share capital, that is to say—
(a)any share capital issued by a company resident in the United Kingdom in consequence of the exercise by any person of an option conferred on him to receive in respect of shares in the company (whether the last-mentioned shares were issued before or after the coming into force of this section) either a dividend in cash or additional share capital; and
(b)any bonus share capital issued by a company so resident in respect of any shares in the company of a relevant class (whether the last-mentioned shares were issued before or after the coming into force of this section).
(2)For the purposes of subsection (1)(b) above a class of shares is a relevant class if—
(a)shares of that class carry the right to receive bonus share capital in the company of the same or a different class; and
(b)that right is conferred by the terms on which shares of that class were originally issued or by those terms as subsequently extended or otherwise varied.
(3)Where a company issues any share capital in a case in which two or more persons are entitled thereto, the following provisions of this section and paragraph 12(1) to (3) of Schedule 19 shall have effect as if the company had issued to each of those persons separately a part of that share capital proportionate to his interest therein on the due date of issue.
(4)Subject to the following provisions of this section, where a company issues any share capital in a case in which an individual is beneficially entitled to that share capital, that individual shall be treated as having received on the due date of issue income of an amount which, if reduced by an amount equal to income tax on that income at the basic rate for the year of assessment in which that date fell, would be equal to the appropriate amount in cash, and—
(a)no assessment shall be made on the individual in respect of income tax at the basic rate on that income but he shall be treated as having paid tax at the basic rate on it or, if his total income is reduced by any deductions, on so much of it as is part of his total income as so reduced;
(b)no repayment shall be made of income tax treated by virtue of paragraph (a) above as having been paid; and
(c)that income shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
(5)Where a company issues any share capital to the personal representatives of a deceased person as such during the administration period, the amount of income which, if the case had been one in which an individual was beneficially entitled to that share capital, that individual would have been treated under subsection (4) above as having received shall be deemed for the purposes of Part XVI to be part of the aggregate income of the estate of the deceased.
This subsection shall be construed as if it were contained in Part XVI.
(6)Where a company issues any share capital to trustees in respect of any shares in the company held by them (or by them and one or more other persons) in a case in which a dividend in cash paid to the trustees in respect of those shares would have been to any extent income to which section 686 applies, then—
(a)there shall be ascertained the amount of income which, if the case had been one in which an individual was beneficially entitled to that share capital, that individual would have been treated under subsection (4) above as having received; and
(b)income of that amount shall be treated as having arisen to the trustees on the due date of issue and as if it had been chargeable to income tax at the basic rate; and
(c)paragraphs (a) to (c) of subsection (4) above shall, with the substitution of “income” for “total income” and with all other necessary modifications, apply to that income as they apply to income which an individual is treated as having received under that subsection.
(7)This section does not apply to—
(a)any share capital of which the due date of issue is earlier than 6th April 1975; or
(b)any share capital issued by a company in respect of shares in the company which confer on the holder a right to convert or exchange them into or for shares in the company of a class which is not a relevant class for the purposes of subsection (1)(b) above where the due date of issue of the share capital so issued precedes the earlier of the following dates, namely—
(i)the day next after the earliest date after 5th August 1975 on which conversion or exchange of the shares could be effected by an exercise of that right; and
(ii)6th April 1976 or, in the case of share capital issued by an investment trust, 6th April 1977.
(8)Where, in a case within subsection (4) above, the share capital in question is issued in respect of shares in the company issued before 6th April 1975 which confer on the holder a right to convert or exchange them into or for shares of a different class, this section shall not apply to so much (if any) of any bonus share capital issued by the company after 5th April 1976 in connection with an exercise of that right as would have been issued if that right had been exercised so as to effect the conversion or exchange of the shares on the earliest possible date after 5th April 1975; and subsections (5) and (6) above shall, where applicable, have effect accordingly.
(9)Where any bonus share capital falling within subsection (1)(b) above is after 5th April 1975 converted into or exchanged for shares in the company in question of a different class, then—
(a)this section shall not apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of that bonus share capital; but
(b)section 230(a) and (b) shall apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of so much of that bonus share capital as caused an individual to be treated under subsection (4) above as having received an amount of income on the due date of issue (or would have done so if the case had been one in which an individual was beneficially entitled to that share capital).
250Returns
(1)A company shall for each of its accounting periods make, in accordance with this section, returns to the inspector of all share capital to which section 249 applies (“relevant share capital”) and which was issued by it in that period.
(2)A return shall be made for—
(a)each complete quarter falling within the accounting period, that is to say, each of the periods of three months ending with 31st March, 30th June, 30th September or 31st December which falls within that period;
(b)each part of the accounting period which is not a complete quarter and ends on the first (or only), or begins immediately after the last (or only), of those dates which falls within the accounting period;
(c)if none of those dates falls within the accounting period, the whole accounting period.
(3)A return for any period for which a return is required to be made under this section (a “return period”) shall be made within 30 days from the end of that period.
(4)No return need be made under this section by a company for any period in which it has issued no relevant share capital.
(5)The return made by a company for any return period shall state—
(a)the date on which any relevant share capital issued by it in the period was issued and, if different, the date on which the company was first required to issue it;
(b)particulars of the terms on which any such share capital so issued by it was issued; and
(c)what is, in relation to any such share capital so issued, the appropriate amount in cash.
(6)If it appears to the inspector that a company ought to have, but has not, made a return for any return period, he may (notwithstanding subsection (4) above) by notice require the company to make a return for that period within such time (not being less than 30 days) as may be specified in the notice; and a return required to be made under this subsection shall, if such be the case, state that no relevant share capital was issued in the period in question.
(7)As regards any share capital included in a return made under this section by a company, the inspector may by notice require the company to furnish him within such time (not being less than 30 days) as may be specified in the notice with such further information relating thereto as he may reasonably require for the purposes of sections 230 and 249, this section and section 251 and paragraph 12 of Schedule 19.
251Interpretation of sections 249 and 250
(1)For the purposes of sections 249 and 250 —
(a)“bonus share capital”, in relation to a company, means share capital issued by the company otherwise than wholly for new consideration or such part of any share capital so issued as is not properly referable to new consideration;
(b)“due date of issue”, in relation to any share capital issued by a company, means the earliest date on which the company was required to issue that share capital;
(c)an option to receive either a dividend in cash or additional share capital is conferred on a person not only where he is required to choose one or the other, but also where he is offered the one subject to a right, however expressed, to choose the other instead, and a person’s abandonment of, or failure to exercise, such a right is to be treated as an exercise of the option;
and in section 254 the definition of “security” (in subsection (1)) and subsections (5) and (11) shall not apply.
(2)In sections 249 and 250 “the appropriate amount in cash”, in relation to any share capital to which section 249 applies—
(a)in a case where that share capital was issued —
(i)in consequence of the exercise of an option such as is mentioned in section 249(1)(a); or
(ii)in a quantity which is determined by or determines the amount of a dividend in cash payable in respect of share capital in the company of a different class,
and where the relevant cash dividend is not substantially greater nor substantially less than the market value of that share capital on the relevant date, means the amount of the relevant cash dividend or, in a case in which section 249(3) applies, a due proportion of that amount;
(b)in a case where paragraph (a) above does not apply, means the market value of that share capital on the relevant date or, in a case in which section 249(3) applies, a due proportion of that market value.
(3)In subsection (2) above—
“the relevant cash dividend”, in a case falling within subsection (2)(a)(i) above, means the cash dividend mentioned in section 249(1)(a) or, in a case falling within subsection (2)(a)(ii) above, means the cash dividend there mentioned (subject to subsection (4) below);
“the relevant date”, in the case of share capital listed in the Stock Exchange Daily Official List, means the date of first dealing and, in the case of share capital not so listed, means the due date of issue; and
“market value”, in relation to any share capital in a company, means, subject to the provisions applied by subsections (5) and (6) below, the price which that share capital might reasonably be expected to fetch on a sale in the open market.
(4)Where, in a case falling within subsection (2)(a)(ii) above, the company on the occasion on which it issues the share capital in question also issues a dividend in cash (“the accompanying cash dividend”) in respect of the shares in the company in respect of which that share capital is issued, “the relevant cash dividend” means the cash dividend mentioned in subsection (2)(a)(ii) above reduced by the amount of the accompanying cash dividend.
(5)Section 150(3) of the 1979 Act (market value of shares or securities listed in the Stock Exchange Daily Official List) shall apply for the purposes of subsection (3) above as it applies for the purposes of that Act.
(6)In the case of shares or securities which are not quoted on a recognised stock exchange at the time when their market value for the purposes of subsection (2) above falls to be determined, subsection (3) of section 152 of the 1979 Act shall apply with respect to the determination of their market value for those purposes as it applies with respect to a determination falling within subsection (1) of that section.