INTM601160 | Transfer of assets abroad: The income charge: Measure of income - stock or scrip dividends

Where an individual owns shares in a UK resident company that makes a stock or scrip dividend payment (see CTM17005) in respect of those shares, that individual is treated for UK income tax purposes as having received an amount of income equal to the appropriate amount in cash. The amount is however only regarded as the income of the individual and is not regarded as income for all purposes of the Taxes Acts.

Thus, if the person abroad is, for example, a company, that stock dividend from a UK company would not on the face of it be income in the company’s hands. As such it would not be taken into account as income that becomes payable to a person abroad for the purposes of transfer of assets.

The position for a stock dividend from a foreign company may however be different. The provisions relating to stock dividends in Chapter 5 Part 4 ITTOIA only apply in respect of stock dividends from UK companies. In considering such an item received from a foreign company, regard would need to be taken of the relevant foreign law as well as the character in the hands of the receiver. If it is not income in the hands of the person abroad or otherwise specifically treated as income, it will fall outside the transfer of assets provisions.