# Scrip or stock dividends



## CKW (20 Dec 2012)

Hi,

If you elect to take a dividend in shares (scrip dividend) as opposed to cash is there still a liability to income tax on the 'payment date' of the dividend or is any tax deferred until you pay CGT when selling the shares if there is a gain?


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## Brendan Burgess (20 Dec 2012)

Hi CK

You are confusing two separate things here. 

Some companies e.g. CRH declare a cash dividend and allow the shareholder to use the net amount to buy shares at a set price and without stockbrokers' charges. 

You will get a dividend counterfoil which will show the gross dividend, DWT, and the net dividend. You treat that just like a cash dividend and pay income tax on it.  

The advantage is that it is usually at a small discount to the price of the share on the day and there are no stockbrokers' charges. 

A scrip issue is something else. The company just issues new shares to all its shareholders. It doesn't pay anyone any cash.  This is not a taxable transaction as there is no income or no wealth generated. 

Say a company has  100 shares worth €11 each.  The company is worth €1,100 . 

They issue one free share for every 10. 
The company is still worth €1,100 but there are now 110 shares, so each share is worth €10.


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## CKW (21 Dec 2012)

Thanks for the clarification.


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## Brendan Burgess (27 Dec 2012)

Hi CKW

I just got a dividend cert from BP which describes the purchase of shares with the cash dividend as a "Scrip Dividend Programme" 

So maybe I have my terminology wrong.  Whatever the terminology, my description of the tax implications is correct.


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