Illustrations - bonus issues and rights issues

In this lesson

1. 0:00 Bonus and rights issues explained
2. 0:28 Understanding bonus issue mechanics
3. 1:23 Calculating chargeable gain with bonus issue
4. 3:15 Rights issue compared to bonus issue
5. 3:51 Calculating chargeable gain with rights issue

About this lesson

By the end, you'll understand the key difference: bonus issues add free shares to your pool, while rights issues require you to pay for new shares at a specified price. This is essential for Taxation (TX) and Advanced Taxation (ATX) exam questions where share disposals follow corporate restructuring. The video uses a practical scenario where Damien acquires shares in Bernard Limited across two dates, then faces a bonus issue and separately a rights issue. You'll see how to calculate the number of new shares received (using the ratio, such as one for two), add them to your share pool at the correct cost, and then work out the cost per share when disposing of part of your holding. The key technique is using a weighted average approach: divide the number of shares being sold by the total shares in the pool, then multiply by the total pool cost to find the cost of disposal. The worked examples show how the same disposal can result in different chargeable gains depending on whether the corporate action was a bonus or rights issue.

Duration: 5m