Readers’ forum: Effect of using proceeds of buyback as a loan

We are about to request HMRC clearance for CTA 2010 s 1033 ‘capital’ treatment in respect of a proposed company purchase of own shares. We are content that all the ‘capital’ treatment conditions are met and on his retirement the individual will dispose of all of his shares and has no ‘associates’ who are still shareholders in the company. Cashflow is a little tight for the company and the proposal is that once the vendor has received his consideration he will immediately lend some of it back to the company and it is expected that the loan-back will be for somewhere between two and three years.

Considering the amount of the loan-back compared to the company’s remaining share capital and other loans it represents about 25%; although the vendor will not hold any share capital after the buyback has taken place. The...