Scrip or stock dividends

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?

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.

Thanks for the clarification.

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.