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(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.
(1)This section applies if share capital is issued as mentioned in section 249(1)(a) or (b) of ICTA (certain share capital issued by UK resident companies in lieu of dividends or as bonus share capital).
(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 income to which section 686 of ICTA applies (accumulation and discretionary trusts: special rates of tax),
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.
(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 within section 249(1)(a) of ICTA (an issue in lieu of cash dividend) is the amount of the cash dividend alternative.
(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 within section 249(1)(b) of ICTA (bonus share capital) 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.
(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
(b)section 701(8) of ICTA (under which similar provision is made for the purposes of Part 16 of ICTA).
(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.
(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 income to which section 686 of ICTA applies) 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 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.
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