Commentary

D6.630 Reduction of capital—structure and implications

Corporate tax
Corporate tax | Commentary

D6.630 Reduction of capital—structure and implications

Corporate tax | Commentary

Reduction of capital

D6.630 Reduction of capital—structure and implications

A reduction of capital can be effected as described at D6.426. A reduction of capital is another method of returning value in a form that can avoid a distribution for tax purposes and a charge to stamp duty. To the extent that the amount paid to shareholders does not exceed the nominal value (plus share premium) of the shares reduced or cancelled, no distribution will arise.

This mechanism is attractive where a company has insufficient distributable reserves to effect a buy-back or a 'B' share scheme. A distribution could also be

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