Enhanced Scrip Dividend
The procedure for entering enhanced scrip dividends is essentially the same as for stock dividends. There are two minor differences.
- Enhanced scrip dividends do not involve a fractional amount of cash if the stock is chosen.
- Because the stock choice is always more attractive than the cash choice, some clients who want the cash choose the stock but arrange to sell it immediately through their broker. This is treated as a ‘small value’ disposal for CGT.
The cash choice, which is usually unattractive, is:
|
Movement code |
CGT/Accounting rule |
Description |
|
ESD |
V1/Income/Expense |
ESD cash dividend |
The stock choice is:
|
Movement code |
CGT/Accounting rule |
Description |
|
ESF |
V8/Income/Expense |
ESD foregone dividend |
|
ESS |
A3/Normal Purchase |
ESD new shares option (pre 6/4/98) |
|
ESN |
A1/Normal Purchase |
Enhanced Scrip New (from 6/4/98) |
|
ESB |
A4/Ask SoR Treatment |
ESD new shares broker purchase |
With the stock choice there is always an ESF entry; there is one of ESS or ESN, and there will be an ESB entry if the stock is immediately sold. If the Autopost is being used, the equivalent events in the Security History are:
|
Enhanced scrip dividend – cash dividend |
corresponding to the ESD mvt code |
|
ESD – foregone dividend amount (net) |
corresponding to ESF |
|
ESD – new shares option |
corresponding to ESS or ESN |
|
ESD – new shares option (broker purchase) |
corresponding to ESB |
As with the ordinary stock dividend it is not possible to tick all of these when the Autopost is run. The client must choose between cash and stock and, if the stock is chosen, whether it was sold immediately.