Annex 1: Minor changes in the law Change 20: Share loss relief: time of issue of corresponding bonus shares: section 89, Schedule 1 (paragraph 57A of Schedule 2 to ITA) and Schedule 2 (application of Part 5 of Schedule 2 in relation to corresponding bonus shares)
This change inserts an explicit provision in section 89 determining the time at which corresponding bonus shares are treated as issued to a company. It is consequential on the inclusion of section 73(3) which treats corresponding bonus shares as subscribed for by the company (see Change 12).
This change is the same as that made in section 150(3) of ITA for the purposes of relief against income tax. See Change 34 in Annex 1 to the explanatory notes on ITA.
The time at which such shares are treated as issued to the company claiming relief needs to be ascertained for the purposes of determining:
	the beginning of the period during which the qualifying trading company must carry on its business wholly or mainly in the United Kingdom (section 78(5)(a));
	the times at which the gross assets requirement is to be met (section 84(1)(a) and (2)(a));
	the time at which the unquoted status requirement is to be met (section 85(1)); and
	if section 87 applies, the time at which the new shares are to be treated as having been issued for the purposes of section 88(2)(b).
A provision corresponding to section 89(2) has been included in Part 5 of Schedule 2 with appropriate adaptation where the matter in question is whether, in relation to the application of transitional provisions,corresponding bonus shares are treated as having been issued before, rather than on, a particular date. A consequential amendment has been made by Schedule 1 adding in Part 6 of Schedule 2 to ITA a provision mirroring that in Part 5 of Schedule 2 to this Act.
This change is a necessary direct consequence of the inclusion, to the advantage of taxpayers, of the explicit treatment of corresponding bonus shares as being subscribed for.
This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with generally accepted practice.