Income Tax (Earnings and Pensions) Act 2003 section 62

Reinvestment of cash dividends

Section 62 sets out how a Share Incentive Plan (SIP) can allow the company to direct that cash dividends on plan shares be reinvested to buy further shares for participants.

• A SIP may authorise the company to direct trustees to use some or all cash dividends from plan shares to buy additional shares for all participants, or for those who elect to reinvest
• The company's direction must specify either the amount of dividends to be reinvested or the method for determining that amount
• The additional shares purchased through this process are called "dividend shares", and the process itself is known as "reinvestment"
• The company can modify or revoke a reinvestment direction at any time, and the trustees may satisfy the requirement by appropriating shares they already hold rather than purchasing new ones