TSEM3270 - Capital items that are income for tax purposes: Trust income: stock (scrip) dividend
If a shareholder takes up the offer of shares in place of a cash dividend, this is a scrip or stock dividend. The cash equivalent is the amount of the scrip or stock dividend. The instructions are at CG33800 onwards. External customers can find this guidance at www.hmrc.gov.uk/manuals/ /cgmanual/CG33800.htm
The treatment in the hands of trustees depends on the category of trust. There are full details at CG33811. External customers can find this guidance at www.hmrc.gov.uk/manuals/cgmanual/CG33811.htm. If the trust is chargeable at the special trust rates the cash equivalent of the stock dividend is chargeable at the dividend trust rate, with a credit for tax at the dividend ordinary rate. TSEM3019 explains which trusts are within ITA/S479.
TSEM3275 has information about enhanced stock (scrip) dividends.