CheckLists.Tax (beta)
G4: Purchase of own shares
GENERAL
- Company law
- Redemption or purchase of own shares may require a capital redemption reserve which is non-distributable (CA 2006, s.733).
- It may be possible to effect a subsequent capital reduction to make the reserve distributable (see 2008 Order).
Legislation:
Companies (Reduction of Share Capital) Order 2008 (SI 2008/1915);
Cases:
HMRC manuals:
Commentary:
See also:
INCOME TAX
Dividends and distributions
Transactions in securities
- Purchase of own shares as a repayment of capital
General
- A distribution in respect of shares is not a distribution insofar as it represents repayment of capital on the shares (s.1000(1)(B)).
- HMRC consider that this applies to a purchase of own shares: "Part of a payment by a company to redeem or purchase its own shares is viewed as a repayment of share capital, and therefore not a distribution to that extent. " (CTM17510).
Amount of share capital repaid
- Depends on share history - see CTM17510.
Legislation: CTA 2010, s.1000;
Cases:
HMRC manuals:
CTM17510 - Distributions: purchase of own shares: application of the distributions legislation;
Commentary:
See also:
- Purchase of own shares is a transaction in securities
- Purchase of shares is expressly a transaction in securities (ITA 2007 s.684(2)).
- Normally no income tax advantage where purchase is by a UK company as the receipt will be a distribution (CTA 2010, s.1000).
Legislation:
Cases:
HMRC manuals:
Commentary:
See also: