Buy-back of company shares

Source: HM Revenue & Customs | | 28/03/2018

When a company makes a purchase of its own shares, any excess paid over the amount of capital originally subscribed for the shares is usually treated as a distribution. However, there are special provisions that enable an unquoted trading company or an unquoted holding company of a trading group to undertake a purchase of its own shares without making a distribution.

In order to do this a clearance application may be made. Under this procedure a company wishing to make a purchase of its own shares can obtain advance confirmation from HMRC that the distribution arising will be an exempt distribution. HMRC’s helpsheet includes some useful flow diagrams to help companies establish whether the payment will qualify as an exempt distribution or not.

Planning note

If the application is approved, the payment is treated as consideration for the disposal of the shares in the hands of the seller and subject to CGT. Where entrepreneurs' relief is available, CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief. Where the necessary conditions are met, a company purchase of own shares can be a tax efficient way of exiting a business.

If you would like to consider your options in more detail please call for further advice.



Accountancy service

“Are you feeling confused about how to comply with HMRC’s accountancy requirements?

Read more...

Your business

Your business

Are you a Start-up business? Are you a little confused about the different types of companies? 

Read more...

Virtual Director

Virtual Director

Are you looking to grow your business? A Virtual Financial Director can help you take your business to the next level.

Read more...

Xero

XERO

Ensure that your business has the edge over your competitors and incorporate Xero into your business, today!

Read more...

Latest News

VAT on property service charges
12/12/2018 - More...
A new Revenue and Customs Brief (6-2018) entitled VAT exemption for all domestic

Are you ready for VAT filing changes April 2019?
12/12/2018 - More...
The introduction of Making Tax Digital (MTD) for VAT is fast approaching. From

Is your income approaching £100,000?
12/12/2018 - More...
For high earning taxpayers, the personal allowance is gradually reduced by £1

Search News


Newsletter

With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter
» Login