Corporation Tax Act 2010

Stock dividends

1049 Stock dividends

(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.

(2) 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.

(3) If the share capital is issued in a case where section 410(2), (3) or (4) of ITTOIA 2005 (stock dividend income) applies—

(a) the share capital does not, despite paragraph C in section 1000(1) (redeemable share capital), constitute a distribution within the meaning of section 1000(1), and

(b) the share capital is not, for the purposes of—

(i) section 1022 (bonus issues following repayment of share capital), or

(ii) section 1026 (distributions following a bonus issue),

treated as issued “as paid up otherwise than by the receipt of new consideration”.

(4) This section is subject to—

(a) section 1050, and

(b) paragraph 108 of Schedule 2 (special rules for share capital issued in respect of shares issued before 6 April 1975).

1050 Application of section 1049 where bonus share capital is converted etc

(1) This section applies if bonus share capital falling within section 1049(1)(b) is converted into, or exchanged for, shares in the company of a different class.

(2) In this section “replacement shares” means 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.

(3) Section 1049 does not apply to any replacement shares.

(4) But if section 410 of ITTOIA 2005 (stock dividend income) applied to any of the bonus share capital, subsection (5) applies to replacement shares issued in consideration of the cancellation, extinguishment or acquisition by the company of the bonus share capital to which section 410 of ITTOIA 2005 applied.

(5) The replacement shares referred to in subsection (4)—

(a) do not, despite paragraph C in section 1000(1), constitute a distribution within the meaning of section 1000(1), and

(b) are not, for the purposes of—

(i) section 1022 (bonus issues following repayment of share capital), or

(ii) section 1026 (distributions following a bonus issue),

treated as issued “as paid up otherwise than by the receipt of new consideration”.

1051 “Bonus share capital” and “in lieu of a cash dividend”

(1) In sections 1049 and 1050 “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 section 1049(1)(a) share capital is issued by a company in lieu of a cash dividend if—

(a) it is issued in consequence of the exercise by a 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).

1052 Share capital to which section 1049 applies: returns

(1) If a company issues, in an accounting period, share capital to which section 1049 applies (“relevant share capital”), the company must make a return of the capital for each return period in which it was issued (see section 1053).

(2) The return must be made—

(a) to an officer of Revenue and Customs, and

(b) within 30 days from the end of the return period.

(3) A return made under this section for a return period must give the following information for any relevant share capital issued by the company in the period—

(a) the date on which it was issued,

(b) the date on which the company was first required to issue it (if different from the date on which it was issued),

(c) details of the terms on which it was issued, and

(d) what its cash equivalent is under section 412 of ITTOIA 2005.

(4) If it appears to an officer of Revenue and Customs that a company should have, but has not, made a return under this section for a particular return period, the officer may by notice require the company to do so.

(5) If no relevant share capital was issued by the company in the return period, a return required to be made under subsection (4) must state that that is the case.

(6) The notice under subsection (4) must specify the period within which the return must be made.

(7) That period must be at least 30 days.

1053 Return periods

(1) For the purposes of section 1052 a company’s return periods in any accounting period are the periods that begin and end as follows.

• Rule 1

  A return period begins at the beginning of the accounting period.

• Rule 2

  If one or more quarterly days fall within the accounting period (excluding the last day of the accounting period), the end of each such day is the end of a return period, and a new return period begins immediately afterwards.

• Rule 3

  A return period ends at the end of the accounting period.

(2) For the purposes of subsection (1) the quarterly days are 31 March, 30 June, 30 September and 31 December.