The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
For unquoted trading companies only, the amount received by a shareholder on selling his shares back to the company may be treated as capital, rather than as a distribution, provided certain conditions are met. For an illustration of how this is computed see Example 1.
This treatment only applies to purchases of own shares by unquoted trading companies that are not 51% subsidiaries of a quoted company, or to purchases of own shares by unquoted holding companies of a trading group.
The Consultation on tax rules for company distributions (LNB News 14/12/2015 177) includes consideration of potential changes to these rules. This is because HMRC considers that in some instances taxpayers’ use of the rules gives an unfair result. The window for responses closes on 3 February 2016, with resulting changes expected to have effect from April 2016.
The repurchase must fulfil either Condition A or Condition B:
Condition A (all must be fulfilled)
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