D5.129 Bonus issues following a repayment of share capital (paragraph H)
There are several types of distributions as detailed in D5.102, the final type listed is where there is a bonus issue following a repayment of share capital; these may be treated as distributions under paragraph H of CTA 2010, s 1000(1).
Without the rules under paragraph H, a company could return value to a shareholder with no distribution by repaying share capital and then issuing bonus shares to the same value as the repayment, the paragraph H rules prevent this and are set out below.
Where a company repays share capital, other than certain preference shares (see below) and simultaneously or subsequently issues bonus shares (of the same or a different class), that issue will normally give rise to a distribution. However, this is only to the extent that the amount of the bonus issue does not exceed the amount of share capital repaid less any amount of share capital previously paid up on a bonus issue and treated as a distribution under this subsection, see Example 11.
For further details on the meaning of repayment of share capital see