Income Tax (Earnings and Pensions) Act 2003 section 493

No charge on acquisition of dividend shares

Section 493 confirms that when dividends on shares held in a Share Incentive Plan (SIP) are reinvested to buy further "dividend shares" on behalf of a participant, no income tax charge arises on that acquisition.

• Amounts applied by SIP trustees to acquire dividend shares on behalf of a participant are not subject to an income tax charge as employment income
• The nominee reporting obligation under section 1105(3) of the Corporation Tax Act 2010 does not apply to amounts used by trustees to acquire dividend shares for a participant
• The income tax exemption for these amounts is provided by section 770 of ITTOIA 2005, which covers amounts applied by SIP trustees in acquiring dividend shares or retained for reinvestment
• The exemption from nominee reporting is subject to paragraph 80(4)(c) of Schedule 2 to ITEPA 2003, which requires information to be provided when dividend shares cease to be subject to the plan