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HMRC internal manual

Stamp Taxes on Shares Manual

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HM Revenue & Customs
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Depositary receipt and clearance services: exemptions/ reliefs: bonus shares

A bonus share, also known as a scrip issue or a capitalisation issue, represents a new share that is issued by a company (paid up out of its undistributed reserves or profits) to an existing shareholder in proportion to his or her existing holding for no payment.

As bonus shares are newly created, shares will vest and register in the name of a shareholder without needing a stock transfer form to be executed or the payment of stamp duty.

Similarly, the issue of shares without payment means that there is no agreement to transfer chargeable securities for the purposes of a charge to Stamp Duty Reserve Tax (SDRT) at the rate of 0.5 per cent, or 1.5 per cent where shares are issued to a depositary receipt issuer or clearance service (although any renunciation and subsequent trading of the shares may be chargeable to SDRT as an interest or right has been transferred).

Secondary trading, or renunciation on sale, of bonus shares with a simultaneous delivery to a depositary receipt issuer or clearance service located anywhere in the world for consideration in money or money’s worth is chargeable to a 1.5 per cent charge, calculated by reference to the amount or value of the consideration. See FA86/S93 (4)(b) and S96 (2)(b).

Any appropriation or deposit by a shareholder of shares in a United Kingdom incorporated company shares that were previously received as a consequence of a bonus issue to a depositary receipt issuer or clearance service is subject to a 1.5 per cent charge, calculated by reference to the market value of the securities at the time of the appropriation. See FA86/S93 (4)(c) and S96 (2)(c).

See STSM055030 for information on bonus shares and allotment letters.