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ACCA Applied Skills · Taxation (UK) · Gains and losses on the disposal of shares and securities

Bella bought 4,000 shares in Lark plc for £10,000 in 2019. On 1 August 2025 Lark plc made a 1 for 4 bonus issue, so Bella received 1,000 new shares. In December 2025 she sold all 5,000 shares for £20,000. What is her chargeable gain for 2025/26 before the annual exempt amount?

The gain is £10,000. A bonus issue is a reorganisation that costs nothing, so the original cost of £10,000 is simply spread over the larger holding. Deducting the £10,000 cost from the £20,000 proceeds gives a chargeable gain of £10,000 before the annual exempt amount.

  1. A£10,000Correct
  2. B£12,000
  3. C£8,000
  4. D£7,500

Explanation

A bonus issue does not cost anything, so the allowable cost stays at £10,000 and is spread over all 5,000 shares. Gain = £20,000 - £10,000 = £10,000. £12,000 is wrong because it treats the bonus shares as costing £2,500 and deducts only... actually it ignores the cost of the original shares in part. £8,000 would be wrong because it wrongly adds £2,000 of cost for the bonus shares.

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