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Differing views
Key points
- The shares that are bought back must be paid for in full at the time of the buyback (CA 2006 s 691(2)).
- In general the amount a shareholder receives over the sum paid for originally subscribed shares is a distribution chargeable to income tax.
- If the onerous conditions in CTA 2010 s 1033 et seq are satisfied however the full amount can be treated as subject to capital gains tax.
- Multiple completions allow the seller to comply with company law but technical conditions must be satisfied from a tax perspective.
One of the mechanisms by which a company can eliminate a shareholder is through a company purchase of own shares. The legal basis for a company buying back its shares is in Companies Act 2006 (CA 2006) s 690 et seq. This article is not a treatise on the relevant company law...
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