Q&As

Can a bonus issue of shares in which only one class of shares held by one shareholder benefits, fall within the reorganisation rules in section 126 of the Taxation of Chargeable Gains Act 1992?

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Produced in partnership with Mary Ashley of Old Square Tax Chambers
Published on LexisPSL on 05/12/2018

The following Tax Q&A Produced in partnership with Mary Ashley of Old Square Tax Chambers provides comprehensive and up to date legal information covering:

  • Can a bonus issue of shares in which only one class of shares held by one shareholder benefits, fall within the reorganisation rules in section 126 of the Taxation of Chargeable Gains Act 1992?

A reorganisation of a company’s share capital should be tax neutral for its shareholders. This is because the essential feature of a reorganisation is that the overall ownership of the reorganised company is unchanged in the sense that the identity and proportionate interests of the shareholders remain the same after the reorganisation has been carried out (see Practice Note: Tax treatment of reorganisations of share capital).

What constitutes a reorganisation for tax purposes is specifically defined by statute.

The legislation provides, in section 126(2) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992

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