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CD 6: When is a transfer caused by a shareholding relationship?
or “How shareholding relationships can lead to transfers of company value”
You could also call this:

“Shares offered instead of cash dividends are still taxed as dividends”

When a company offers you a bonus issue instead of a dividend, it’s still considered a dividend. This means you’re getting something of value from the company, even if it’s not cash.

The amount of the dividend is equal to the value of what the company offers you as an alternative to the bonus issue. This could be money or something else that has a monetary value.

You should know that this rule applies to all bonus issues offered in place of dividends. The company can’t avoid treating it as a dividend just by calling it a bonus issue.

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Next up: CD 7B: Shares issued under profit distribution plans

or “Shares given as part of a profit-sharing plan count as dividends”
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Part C Income
Income from equity

CD 7Bonus issues in lieu of dividend

  1. A bonus issue in lieu is a dividend.

  2. The amount of the dividend is the money or money’s worth offered as an alternative.

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Notes
  • Section CD 7(2): amended (with effect on 1 October 2012), on , by section 6 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).