| Commentary

197 Tax on reduction of share capital

| Commentary

197 Tax on reduction of share capital

Where a person receives a capital distribution in consequence of a reduction of share capital, or merely becomes entitled to one, he is treated as disposing of an interest in his shares for the purpose of capital gains tax1.

A repayment of equity share capital, if preceded by a bonus issue of shares made after 6 April 1965, is treated as a distribution for tax purposes up to the amount of the bonus issue2. Similarly, a return of capital made after 6 April 1965 in respect of equity shares

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