Are scrip dividends from Santander income or capital distributions. As they are taxed at 21% can this be credited against UK tax & if so is it income tax or capital gains tax? And where on the SA Tax Return does one declare these?
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Hi Adrian
Scrip dividends (or stock dividends as they are referred to by HMRC) are treated as income by virtue of CTA10/S1049, and taxable as savings income under Chapter 5 of Part 4 of ITTOIA05 (sections 409 to 414).
As Santander's holding company that pays the dividends is domiciled in Spain the divdends should be reported on the foreign pages of the tax return.
The 21% Spanish tax credit can be set off against the UK tax liability but any excess of the Spanish tax credit over the correrponding UK tax liability cannot be claimed back.
Except that
they are not taxable in the UK because it is a foreign company. Read the Santander Scrip Booklet HERE In particular start reading from page 15
Reduction in capital
My understanding is that whatever option people chose this year, the resulting 'dividends' were instead a distribution of capital, and therefore for most people will be treated as a reduction in their cost and none need to be reported on the UK tax return...
P
Reduction in capital but not if they were a free issue..
If the Santander holding came from a free issue of shares upon floatation (for example Abbey National), there is no base cost to reduce and therefore they become a straight capital gain.
True, most people do not have capital gains on a regular basis and therefore such small gains are covered by the annual CGT exemption but if they are declaring other gains then the capital distributions from Santander need to be included on the CGT pages
R