Part 4

Savings and investment income
Chapter 4

Dividends from non-UK resident companies

Shares in Schedule 2 share incentive plans (“SIPs”)

Dividend payment when dividend shares cease to be subject to SIP
407
1
This section applies if dividend shares cease to be subject to a Schedule 2 incentive plan before the end of the period of 3 years beginning with the date on which the shares were acquired on the participant's behalf.
2
For income tax purposes a dividend is treated as paid to the participant in the tax year in which the shares cease to be subject to the plan.
3
The amount of the dividend treated as paid is the amount of the cash dividend applied to acquire the shares on the participant's behalf, so far as it represents a cash dividend paid in respect of plan shares in a non-UK resident company.
3A
But if the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 65(2) of Schedule 2 to
ITEPA
2003 (provision requiring dividend shares to be offered for sale), the amount of the dividend treated as paid is the amount equal to the relevant fraction of the market value of the shares at the time they are offered for sale if that amount is less than the amount given by subsection (3).
3B
For the purposes of subsection (3A) “the relevant fraction” is—
A/B
where—
A is so much of the amount of the cash dividend applied to acquire the shares on the participant's behalf as represents a cash dividend paid in respect of plan shares in a non-UK resident company, and
B is the amount of the cash dividend applied to acquire the shares on the participant's behalf.
3C
Paragraph 92(2) of Schedule 2 to
ITEPA
2003 (market value of shares subject to a restriction) applies for the purposes of subsection (3A).
4
The person liable for any tax charged as a result of this section is the participant.
4A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
For rules identifying shares ceasing to be subject to Schedule 2 share incentive plans, see section 508 of ITEPA 2003.
S. 407(3A)-(3C) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 63(3), 89 (with Sch. 8 paras. 90-96)
S. 407(4A) omitted (with effect in accordance with Sch. 1 para. 73 of the amending Act) by virtue of Finance Act 2016 (c. 24), Sch. 1 para. 15
Words in s. 407(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 63(2), 89 (with Sch. 8 paras. 90-96)
Words in s. 405 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 61, 89 (with Sch. 8 paras. 90-96)
Words in s. 407(5) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 63(4), 89 (with Sch. 8 paras. 90-96)