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HMRC internal manual

Employment Related Securities Manual

Securities Options: bonus shares

Sometimes the holder of employment-related securities will be offered bonus shares, or replacement shares in a reorganisation. As for rights issues, there will rarely be a gain because the issue of bonus or replacement shares will reduce the value of the existing holding. For replacement shares this value will actually become nil. Relief for such a reduction in value is provided by ITEPA03/S421D (3).


If there is a single class of shares and a one-for-one bonus issue each share will halve in value. In other words, if the share price were originally £1, each share will now be worth 50p. The holder will have received an additional share worth 50p from which is deducted the 50p fall in value of the original share (£1 down to 50p), leaving a gain of nil.