Commentary

D6.610 Buy-back of share capital—capital treatment

Corporate tax
Corporate tax | Commentary

D6.610 Buy-back of share capital—capital treatment

Corporate tax | Commentary

D6.610 Buy-back of share capital—capital treatment

Qualifying conditions

If the following conditions1 are met, a payment made by an unquoted trading company on the redemption, repayment or purchase of its own shares (including stock2) will automatically be treated as a capital payment (and the vendor will be treated as receiving a capital receipt3):

  1.  

    (a)     the company is an unquoted trading company or holding company of a trading group. A company which is a 51% subsidiary of a quoted company is regarded as a quoted company for this purpose4. If the company is partially quoted, it will not qualify even if the shares purchased are unquoted.

  2.  

    For a company or group of companies to be trading, the business of the company (or group of companies taken together) must consist wholly or mainly of the carrying on of a trade. The holding company of a trading group will only qualify as such if it is a parent company which has one or more 75% subsidiaries, and whose business (apart from any

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