(1)Income tax is charged on stock dividend income.
(2)In this Chapter “stock dividend income” means the income that is treated as arising under section 410.
[F1(1)This section applies to—
(a)share capital issued by a UK resident company in lieu of a cash dividend, and
(b)bonus share capital issued by a UK resident company in respect of shares in the company of a qualifying class.
(1A)For the purposes of subsection (1)(b), shares are of a qualifying 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.]
(2)If an individual is beneficially entitled to that share capital, income is treated as arising to the individual.
(3)If—
(a)the share capital is issued to trustees in respect of shares they hold in the company (alone or with others), and
(b)a cash dividend paid to them in respect of the shares would have been to any extent [F2accumulated or discretionary income (as defined in section 480 of ITA 2007 but excluding income arising under a [F3charitable trust] or an unauthorised unit trust in relation to which section 504 of that Act applies)],
income is treated as arising to the trustees.
(4)If the share capital is issued to personal representatives during the administration period, income is treated as arising (but see section 413(4)).
(5)In subsection (4) “administration period” has the meaning given by section 653.
(6)Income within this section is treated as arising on the earliest date on which the company is required to issue the share capital in question.
(7)See section 413(5) (apportionment) if two or more persons are entitled to the share capital.
[F4(8)There are special rules in paragraph 78A of Schedule 2 for share capital issued in respect of shares issued before 6 April 1975.]
Textual Amendments
F1S. 410(1)(1A) substituted (1.4.2010) for s. 410(1) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 458(2) (with Sch. 2)
F2Words in s. 410(3)(b) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 519 (with transitional provisions and savings in Sch. 2)
F3Words in s. 410(3)(b) substituted (with effect in accordance with art. 15 of the commencing S.I.) by Finance Act 2010 (c. 13), Sch. 6 paras. 21(2), 34(2); S.I. 2012/736, art. 15
F4S. 410(8) inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 458(3) (with Sch. 2)
(1)This section applies if bonus share capital falling within section 410(1)(b) is converted into, or exchanged for, shares in the company of a different class.
(2)Section 410 does not apply to any shares in the company issued—
(a)in connection with the conversion or exchange, and
(b)in consideration of the cancellation, extinguishment or acquisition by the company of the bonus share capital.]
Textual Amendments
F5S. 410A inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 459 (with Sch. 2)
(1)Tax is charged under this Chapter on the amount of stock dividend income treated for income tax purposes as arising in the tax year.
(2)That amount is the cash equivalent of the share capital on the issue of which the stock dividend income arises (see section 412), grossed up by reference to the dividend ordinary rate for the tax year.
(1)The cash equivalent of share capital [F6issued as mentioned in section 410(1)(a) is the amount of the cash dividend alternative (see section 414A(2))].
(2)But if the difference between the cash dividend alternative and the share capital's market value equals or exceeds 15% of that market value—
(a)subsection (1) does not apply, and
(b)the cash equivalent of the share capital is its market value.
(3)The cash equivalent of share capital [F7issued as mentioned in section 410(1)(b)] is its market value.
(4)For the purposes of this section, market value is determined—
(a)in the case of listed share capital, on the date of first dealing, and
(b)in the case of other share capital, on the earliest date on which the company is required to issue it.
(5)In this section—
“listed” means listed in the Stock Exchange Daily Official List, and
“market value” has the same meaning as in sections 272(1) and (3) and 273(3) of TCGA 1992.
Textual Amendments
F6Words in s. 412(1) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 460(2) (with Sch. 2)
F7Words in s. 412(3) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 460(3) (with Sch. 2)
Modifications etc. (not altering text)
C1S. 412(1)(2)(4)(5) applied (16.12.2010) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 142A(5) (as inserted (with effect in accordance with Sch. 4 para. 12 to the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 4 para. 1)
C2S. 412(1)(2)(4)(5) applied (16.12.2010) by Corporation Tax Act 2010 (c. 4), s. 599A(2) (as inserted (with effect in accordance with Sch. 4 para. 12 to the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 4 para. 10)
(1)The person liable for any tax charged under this Chapter is the person indicated by this section.
(2)If section 410(2) applies, the individual is liable for the tax.
(3)If section 410(3) applies, the trustees are liable for the tax.
(4)If section 410(4) applies, tax is not charged under this Chapter, but see—
(a)section 664 (under which the income treated as arising to the personal representatives under section 410 is treated as part of the aggregate income of the estate for the purposes of Chapter 6 of Part 5), and
[F8(b)section 947 of CTA 2009 (under which similar provision is made for the purposes of Chapter 3 of Part 10 of that Act)].
(5)If two or more persons are entitled to the share capital on the issue of which the stock dividend income arises, this Chapter applies as if the company issuing it had issued to each of those persons a proportionate part of the share capital.
(6)In subsection (5) “proportionate part” means a part proportionate to the person's interest on the earliest date on which the company is required to issue the share capital.
Textual Amendments
F8S. 413(4)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 630 (with Sch. 2 Pts. 1, 2)
(1)A person liable to tax under this Chapter is treated as having paid income tax at the dividend ordinary rate on the income charged, and where trustees are so liable (because a cash dividend paid to them in respect of the shares would have been to any extent [F9accumulated or discretionary income (as defined in section 480 of ITA 2007)]) the income is treated as if it had been chargeable to tax at that rate.
(2)The income tax treated as paid under subsection (1) is not repayable.
(3)The amount on which an individual is treated under subsection (1) as having paid income tax is reduced if subsection (4) applies.
(4)This subsection applies if the individual's total income is reduced by any deductions which fall to be made [F10at Step 2 or 3 of the calculation in section 23 of ITA 2007 (calculation of income tax liability)] from the part of the income charged to tax under this Chapter.
(5)The reduction under subsection (3) is equal to the amount of those deductions.
Textual Amendments
F9Words in s. 414(1) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 520(2) (with transitional provisions and savings in Sch. 2)
F10Words in s. 414(4) inserted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 520(3) (with transitional provisions and savings in Sch. 2)
(1)In this Chapter “bonus share capital” means—
(a)share capital issued otherwise than wholly for new consideration, or
(b)the part (if there is such a part) of any share capital so issued that is not properly referable to new consideration.
(2)For the purposes of this Chapter share capital is issued by a company in lieu of a cash dividend if—
(a)it is issued in consequence of the exercise by any person of an option conferred on the person, and
(b)that option is an option to receive, in respect of shares in the company, either a dividend in cash or additional share capital.
(3)For the purposes of subsection (2), an option to receive either a dividend in cash or additional share capital is conferred on a person not only—
(a)if the person is required to choose one or the other, but also
(b)if the person is offered the one subject to a right, however expressed, to choose the other instead.
(4)The reference in subsection (2) to a person's exercise of an option includes a person's abandonment of, or failure to exercise, a right such as is mentioned in subsection (3)(b).
(5)In this Chapter “share” includes stock, and any other interest of a member in a company.
(6)If two or more companies enter into arrangements to make distributions to each other's members, all parties concerned (however many) may, for the purposes of this Chapter, be treated as if anything done by any one of those companies had been done by any one of the others.
(7)The following apply in relation to this Chapter as they apply in relation to Part 23 of CTA 2010—
(a)section 1113 (“in respect of shares”) of CTA 2010,
(b)section 1115 (“new consideration”) of CTA 2010.]
Textual Amendments
F11S. 414A inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 461 (with Sch. 2)
Modifications etc. (not altering text)
C3Ss. 414A(2)-(4) applied (16.12.2010) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 142A(4) (as inserted (with effect in accordance with Sch. 4 para. 12 to the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 4 para. 1)