Tax issues on share buybacks for corporate lawyers

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Tax issues on share buybacks for corporate lawyers
  • Off-market or on-market?
  • Structure of a share buyback
  • How is a share buyback by an intermediary acting as principal taxed?
  • Treatment of UK resident shareholders
  • Treatment of the intermediary
  • Treatment of the company
  • How are UK resident individuals taxed on a share buyback by a company directly or through an intermediary acting as agent?
  • Income tax treatment
  • Capital gains tax treatment
  • More...

Tax issues on share buybacks for corporate lawyers

A limited company may buy back its own shares, if certain conditions set out in the Companies Act 2006 (CA 2006) are met. This is known as a share buyback or a purchase of own shares. In addition to the provisions of the CA 2006, there are other rules and guidelines that are relevant to a listed company or an AIM company.

The restrictions in the CA 2006 relating to share buybacks do not apply to unlimited companies. For further information on this type of company, see Practice Note: Unlimited companies.

For an introduction to share buybacks, see Practice Note: Share buybacks—a quick guide.

For a consideration of the law applicable to a share buyback and information on why a company might wish to carry out one, see Practice Note: Share buybacks—the legal framework.

Off-market or on-market?

Two types of share buyback are possible:

  1. an off-market purchase of shares, or

  2. a market (or on-market) purchase of shares

For an explanation of the differences between an off-market share buyback and an on-market share buyback, see Practice Note: Share buybacks—the legal framework.

Structure of a share buyback

A share buyback by a company is typically structured in one of three ways:

  1. an intermediary (usually the company's broker) acting as principal, purchases the shares from shareholders in the company and the company then purchases those shares from the

Popular documents