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Purchase of own shares: Little by little?

Shared from Tax Insider: Purchase of own shares: Little by little?
By Mark McLaughlin, October 2023

Mark McLaughlin highlights HMRC’s apparently stricter application of the rules regarding company purchases of own shares by multiple completion.  

The purchase by a company of its own shares (e.g., from a retiring or dissenting individual shareholder) is possible where company law requirements are met. 

Tax treatment 

For tax purposes, any payment in excess of the capital originally subscribed for the shares is normally a taxable income distribution, similar to a dividend.  

However, there is a potential exception from this income tax treatment for unquoted trading companies. If certain conditions are satisfied, the individual vendor is normally treated as receiving a capital payment instead. Capital gains tax (CGT) treatment will often be more tax-efficient for the shareholder than an income distribution. 

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