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HMRC internal manual

Company Taxation Manual

Distributions: stock dividends: conversion of bonus capital


  • If bonus share capital which falls within CTA10/S1049 is converted into, or exchanged for, shares in the company of a different class, the stock dividend rules are not applied to the replacement shares, including whether these are acquired in exchange for cancellation or extinguishment of the bonus share capital. However, where a charge under ITTOIA05/S409 has arisen, the replacement shares are subject to the treatment described at CTM17005, that is, they do not give rise to a distribution by virtue of being bonus shares.