Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
, see all updates

Quoted options to subscribe for shares: bonus issue of share warrants

A company may make a bonus issue of share warrants to its existing shareholders.

Company

As far as the company is concerned the issue of warrants for no consideration is not an arm’s length bargain. The issue of the warrants should be treated as the grant of an option for a consideration equal to the value of the option. In practice you can take this to be the market value of the options on the first day on which they are traded. Any assessment raised on the grant of the option will be reduced or discharged if the warrants are exercised, see CG55458.

Shareholder

Unless TCGA92/S147 applies, see CG55485, the shareholder should be treated as having received a capital sum derived from an asset, TCGA92/S22, see CG12940+. The disposal proceeds will be equal to the market value of the warrants on the first day they are quoted.

If the warrants are exercised the Section 22 assessment is not discharged. The shareholders acquire the new shares at an amount equal to the price paid plus the open market value of the option included in the Section 22 computation.

If the warrants are not exercised the shareholders will have a capital loss equal to the open market value of the option included in the Section 22 computation..