Corporation Tax Act 2010 section 599A

Amount of distribution consisting of share capital issued in lieu of cash dividend

Section 599A explains how to determine the value of a distribution for corporation tax purposes when a company issues shares instead of paying a cash dividend (commonly known as a stock dividend or scrip dividend).

• When a company issues share capital instead of a cash dividend, the distribution is valued at its cash equivalent for corporation tax purposes.
• The cash equivalent is determined using the rules set out in the Income Tax (Trading and Other Income) Act 2005, which already govern stock dividends for income tax purposes.
• In practice, the cash equivalent is generally the amount of the cash dividend that the shareholder would have received had they not opted for shares.
• This rule ensures that a distribution cannot avoid being valued simply because it takes the form of shares rather than cash.