Ordinary share capital—what it means and why it matters for UK tax purposes
Produced in partnership with Robert Langston of Saffery Champness
Ordinary share capital—what it means and why it matters for UK tax purposes

The following Tax guidance note Produced in partnership with Robert Langston of Saffery Champness provides comprehensive and up to date legal information covering:

  • Ordinary share capital—what it means and why it matters for UK tax purposes
  • No gain/no loss treatment on intragroup transfers
  • Corporation tax group relief
  • Substantial shareholdings exemption
  • Share for share exchanges and schemes of reconstruction
  • Entrepreneurs’ relief and investors’ relief
  • Relief for employee share acquisitions
  • EIS and SEIS relief
  • Definition of ordinary share capital

The concept of ordinary share capital is important for UK tax purposes. This Practice Note sets out the key tax reliefs that require ordinary share capital (whether issued by a UK company or not), namely:

  1. no gain/no loss treatment on intragroup transfers

  2. corporation tax group relief

  3. substantial shareholdings exemption

  4. share for share exchanges

  5. entrepreneurs’ relief

  6. relief for employee share acquisitions, and

  7. enterprise investment scheme (EIS) and seed enterprise investment scheme (SEIS) relief

This Practice Note then considers the definition of ordinary share capital for UK tax purposes.

No gain/no loss treatment on intragroup transfers

Assets may be transferred between companies, which are subject to UK corporation tax and within a 75% group, without crystallising tax on any gains arising. For more details, see Practice Note: Intra-group asset transfers.

For these purposes, a group consists of a principal company and all of its 75% subsidiaries. A company will only be a 75% subsidiary if, inter alia, it has issued ordinary share capital. Gains (and losses) may therefore arise on the transfer of an asset to a company that has not issued ordinary share capital (eg a company limited by guarantee, which has not been able to issue share capital since 1980), or which is a member of a group only by linking through a company, which has not issued ordinary share capital, to