Income Tax (Trading and Other Income) Act 2005 section 406

Later charge where cash dividends retained in SIPs are paid over

Section 406 deals with the income tax treatment of cash dividends that have been held by Share Incentive Plan (SIP) trustees and are subsequently paid out to participants rather than being reinvested in dividend shares.

• When SIP trustees pay over a retained cash dividend to a participant, income tax is charged in the tax year the dividend is actually paid over, not the year it was originally paid by the company
• The tax is charged on the full amount of the cash dividend paid over to the participant
• The participant who receives the cash dividend is personally liable for the tax due
• Whether the dividend counts as being from a non-UK resident company is determined by looking at the tax year in which the dividend was originally paid, not when it was paid over to the participant