‘Stock dividends’ are taxable as income

‘Stock dividend’ as a general term is often used to describe the case where a company, particularly a quoted company, offers its shareholders the option of receiving additional shares in lieu of a cash dividend, as bonus share capital (meaning no new consideration is provided to the company in return). This may be advantageous to the shareholder, who can avoid the dealing costs involved in buying fresh shares in the company, and may be preferable to the company which does not have to pay out cash. ‘Stock dividends’ may also be referred to as ‘scrip dividends’ or ‘bonus issues’.

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