SAIM5170 | Dividends and other company distributions: stock dividends: the tax charge: cash equivalent

Meaning ‘cash equivalent’

ITTOIA05/S412 sets out the amount of the cash equivalent (in other words the net amount of the stock dividend income, which for stock dividends treated as arising in tax years up to 2015-16 was grossed up).

ITTOIA05/S412 (1) deals with stock dividends within CTA10/S1049 (1)(a) - issue of share capital in lieu of a cash dividend. The cash equivalent of such share capital is the amount of the cash dividend alternative unless ITTOIA05/S412 (2) applies.

ITTOIA05/S412 (2) applies if the difference between the cash dividend alternative and the share capital’s market value equals or exceeds 15% of that market value. In that case, the cash equivalent is not the amount of the cash dividend alternative but the market value of the share capital instead.

ITTOIA05/S412 (3) deals with stock dividends within CTA10/S1049 (1)(b) - bonus share capital issued under the terms of the capital creating the right. The cash equivalent of such share capital is its market value.

Market value means the value on the date of the first dealing of listed share capital, or on the earliest date it was required to be issued.