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HMRC internal manual

Capital Gains Manual

Share Incentive Plan (SIP): employee: share reorganisations: CGT

The company whose shares are plan shares (see CG56495) may reorganise its share capital, for example by making a bonus or rights issue, or be the subject of a successful take-over so that its shares are replaced by new shares or securities.

Where the new holding of shares or securities is equated with the original holding for the purposes of capital gains tax, or where this would be the case if what would be the new holding did not consist of or include a qualifying corporate bond (QCB), the employee is not treated as disposing of his plan shares. The new holding (or QCB) is treated as if it were the original shares, and as plan shares for the purposes of the schedule. See Schedule 2 Part 11. ITEPA03.

If there is a rights issue, the only rights issue shares that are treated as part of the new holding are those

  • where similar rights applied to all ordinary shares of the company and
  • where the rights issue shares were acquired with funds realised by the trustees from selling some of the employee’s other rights in respect of plan shares.

The following shares and securities (in respect of which a charge to Income Tax arises) cannot form part of the new holding:

  • redeemable shares or securities issued as mentioned in CTA10/S1000 (1) paragraph C or D
  • bonus issue shares issued following a repayment of share capital such that CTA10/S1022 (3) applies


  • stock dividends issued where ITTOIA05/S410 (2) or (3) applies.

Where in the course of a share reorganisation or take-over etc anything is received that cannot be equated with the original holding and treated as plan shares, it is treated as being received before the new holding (or QCB) is received. This includes cash.