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Stock dividends—overview

Companies frequently offer shareholders the option of taking additional shares in the company as an alternative to a cash dividend. Such shares are called stock, or 'scrip', dividends.

Where the recipient of such shares is an individual, the amount of the cash dividend (or, if greater, the market value of the stock dividends), is deemed to be savings income of the recipient¹ (which, for tax years before 2016/17, suffered deduction of tax at the dividend ordinary rate²).

Trustee shareholders rarely take up such offers, because any benefit to the trust is often outweighed by the administrative complications and the cost of transferring the shares to the person entitled.

However, they are more likely to take the additional shares when they are offered as an 'enhanced scrip dividend', ie where the number of issued shares is deliberately set so that their market value is significantly higher than the cash alternative.

Stock dividends received by interest in possession trustees

Stock dividends received by IIP trustees—overview

The trust law on