Corporation Tax Act 2010 section 1022

Bonus issue following repayment of share capital treated as distribution

Section 1022 explains how a bonus issue of shares made after a company has repaid share capital can be treated as a distribution for corporation tax purposes.

• Where a company repays share capital and subsequently issues bonus shares (paid up without receiving new consideration), the amount paid up on those bonus shares may be treated as a distribution.
• The amount treated as a distribution is limited to the "adjusted amount" of the repaid share capital — essentially the total share capital previously repaid, reduced by any earlier bonus issues already treated as distributions under this rule.
• If the bonus issue amount exceeds the adjusted amount of repaid share capital, only the portion up to that adjusted amount is treated as a distribution; any excess is not caught.
• This rule is subject to any contrary provision elsewhere in the Corporation Tax Acts, and is further qualified by section 1023.