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HMRC internal manual

Capital Gains Manual

Co.purchases own shares: treated as distribution: UK resident cos


If the purchase of own shares took place on or before 19 April 1989 the treatment is exactly the same as that for other shareholders.

If the purchase takes place after 19 April 1989 the disposal proceeds are not reduced by the amount of the distribution. The distinction between shareholders who are UK resident companies and other shareholders was announced in SP4/89 and follows from ICTA88/S208. This provides `except as otherwise provided by the Corporation Tax Acts, Corporation Tax shall not be chargeable on dividends and other distributions of a company resident in the United Kingdom, nor shall any such dividends or distributions be taken into account in computing income for Corporation Tax’.

This treatment only applies to a purchase of own shares. It does not apply to a redemption or reduction in share capital. These are dealt with in CG58655+.