santel

Hi, I've read contradictory information regarding the treatment of income tax on company Dividend Reinvestment Plans (DRIP), the assumption being that the dividend amount is above the current dividend allowance. On one hand, the implication is that income tax is due on the cash equivalent of the dividend at time of payment, on the other hand I 've read that if one doesn't actually receive the dividend then no income tax is due at that time and tax would be payable at time of sale along with any potential CGT. A previous HMRC answer said; "Posted 3 months ago by HMRC Admin 20 Response Hi If, the company reinvests the dividends by using them to purchase additional shares on a shareholders’ behalf through a dividend reinvestment plan (DRIP) (the company reinvests the shares automatically, without the shareholder having to do a thing or ever receiving the dividends physically themselves), that shareholder does not pay income tax on the reinvested dividends until they eventually sell the shares. Thank you." However a company (BT) that offers a DRIP clearly states in their documentation that; "What are the tax effects of joining the Plan? For tax purposes, you are treated as if you had received the whole of your dividend in cash and bought BT shares yourself. A dividend confirmation covering the whole amount of the dividend invested in the Plan will be attached to your purchase statement" Can you please clarify the position, if I elect to join a company DRIP and have dividends automatically reinvested to purchase shares when is income tax due on the cash equivalent dividend amount? Thanks.