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HMRC internal manual

Capital Gains Manual

Shares and securities: share reorganisations

Chapter 3, CG51700+, deals with reorganisations of share capital.

A company may issue new shares to its existing shareholders in their capacity as shareholders either free (this is known as a bonus issue) or for payment (a rights issue). A company may also subdivide or aggregate its shares (for instance by replacing its 10p shares with one tenth the number of £1 shares, or its £10 shares with ten times the number of £1 shares). We want the tax treatment to reflect the commercial reality of such transactions, so where the shareholder stands in the same relationship to the company before and after such a reorganisation of share capital, there are provisions for treating the reorganisation as involving neither a disposal of the original shares held nor an acquisition of new shares acquired (and so no gain or loss accrues to the shareholders at the time of the reorganisation).

Reorganisations of share capital can take other forms, and may be complex. Detailed guidance is at CG51700+