Finance (No. 2) Act 1997

Part IIBonus issues

6A person (“the claimant”) who receives an amount treated as a distribution by virtue of section 209(3), 210 or 211(1) of the Taxes Act 1988 (“a bonus issue”) shall not be entitled to a payment under section 35(1) of this Act in respect of that distribution, except to the extent that paragraph 7 below otherwise provides.

7Paragraph 6 above shall not affect a person’s entitlement to a payment under section 35 of this Act in respect of that part (if any) of a bonus issue made in respect of any shares or securities which, if it had been declared as a dividend, would represent a normal return to the claimant—

(a)on the consideration provided by him for the relevant shares or securities, that is to say, those in respect of which the bonus issue was made; and

(b)if the relevant shares or securities are derived from shares or securities previously acquired by the claimant, on the shares or securities which were previously acquired.

8For the purposes of paragraph 7 above—

(a)if the consideration provided by the claimant for any of the relevant shares or securities was in excess of their market value at the time he acquired them, or if no consideration was provided by him for any of the relevant shares or securities, the claimant shall be taken to have provided for those shares or securities consideration equal to their market value at the time he acquired them; and

(b)in determining whether an amount received by way of dividend exceeds a normal return, regard shall be had to the length of time previous to the receipt of that amount since the claimant first acquired any of the relevant shares or securities and to any dividends and other distributions made in respect of them during that time.