ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice. Change 23: Share loss relief: corresponding bonus shares: sections 135 and 151
This change legislates the practice that corresponding bonus shares are qualifying shares for share loss relief.
When shares are issued by way of bonus, they are not issued for consideration. Bonus shares do not, therefore, meet the requirements of section 574(3)(a) of ICTA (rewritten as section 135(2) of this Act) that the individual has subscribed for the shares in consideration of money or money’s worth.
In practice, where ordinary shares in the same company, of the same class and carrying the same rights as shares for which an individual has subscribed are issued by way of bonus, claims for relief on the disposal of the shares issued by way of bonus are accepted.
Accordingly, section 135(4) provides that, where an individual who has subscribed in consideration of money or money’s worth for shares in a qualifying trading company is issued with bonus shares in that company which are of the same class and carry the same rights (corresponding bonus shares), the individual is treated as having also subscribed for the corresponding bonus shares in consideration of money or money’s worth.
This means that the corresponding bonus shares are shares which have been subscribed for by the individual for the purposes of section 131(2)(b).
The definitions of bonus shares and corresponding bonus shares are in section 151(1) and (2).