VCM26090 - Enterprise Investment Scheme (EIS): Income Tax relief: Identifying shares - bonus issue

ICTA/S289B (3)(b)(ii); ITA/S201

Where some of the shares in a holding were acquired by means of a bonus issue in respect of shares already held, they are treated as having been acquired as part of the original holding.

Example 

Mr Marley subscribed £48,000 for 2,400 shares issued on 1 June 2000, and obtained relief on that amount. On 1 December 2001 there was a “ten for one” bonus issue, so he is regarded as having acquired 26,400 shares on 1 June 2000.

If Mr Marley sells 19,800 shares on 1 September 2002 for £54,000 the relief to be withdrawn is tax on 19,800 / 26,400 x £48,000 = £36,000.

If the date when Mr Marley sells is 1 September 2003 (more than three years after 1 June 2000 but less than three years after 1 December 2001) no relief is withdrawn, because all the shares are regarded as issued on the earlier date.