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HMRC internal manual

Capital Gains Manual

Reorganisations of share capital: capital reduction: foreign companies

In practice you are most likely to meet problems with this section when dealing with foreign companies which have more freedom to repay their share capital than UK companies do. A typical repayment may involve a reduction in the paid up value of the shares. The application of the reorganisation rules to non-UK companies can be difficult but usually our approach is to treat a repayment of this type as a reorganisation as defined in TCGA92/S126(1). Often the only difference between treating the reduction as a reorganisation or as a disposal is the method of apportioning the base cost of the shares. TCGA92/S42 will apply if the reduction is a disposal and TCGA92/S129 will apply if the reduction is a reorganisation.