Finance Act 1968

23 Stock dividend options

(1) Any share capital, other than redeemable share capital, issued by a company (whether before or after the passing of this Act) in consequence of the exercise by any person of an option conferred on him on or after 19th March 1968 to receive in respect of shares in the company either a dividend in cash or additional share capital shall be treated for the purposes of the Corporation Tax Acts as a distribution by the company, and the income tax chargeable in respect of it by virtue of section 47 of the [1965 c. 25.] Finance Act 1965 shall be tax on the sum on which tax would have been chargeable by virtue of that section if the person in question had accepted the cash dividend instead.

(2) For the purposes of paragraphs 1(3) and 2(1) of Schedule 11 to the [1965 c. 25.] Finance Act 1965 (matters to be treated as distributions), share capital issued as mentioned in subsection (1) above shall not be treated as issued as paid up otherwise than by the receipt of new consideration.

(3) In applying—

(a) paragraph 4(3) of Schedule 7 to the Finance Act 1965 (chargeable gains: reorganisation of share capital), and

(b) paragraph 10(3) of Schedule 9 to the [1962 c. 44.] Finance Act 1962 (corresponding provision for tax on short-term gains),

in relation to the issue of the share capital to which subsection (1) above applies, as involving a reorganisation of the company's share capital, there shall be allowed, as consideration given for the new holding which includes that share capital, the sum referred to in subsection (1) above less income tax at the standard rate; and this subsection shall have effect notwithstanding the proviso to the said paragraph 4(3) and the proviso to the said paragraph 10(3).

(4) For the purposes of subsection (1) above, 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 for those purposes as an exercise of the option.

(5) Part I of Schedule 11 to the said Act of 1965 shall have effect as if this section were contained in that Part.