Co.purchases own shares: covered by ICTA88 S219
A purchase of own shares will be treated as not giving rise to a distribution
- if the purchase is made by an unquoted trading company,
- the conditions in ICTA88/S219 - ICTA88/S229 are satisfied.
For further instructions on Section 219 see CT1750+.
In these cases the whole of the sale proceeds are brought into the Capital Gains Tax computation. The application of ICTA88/S219 is mandatory if the relevant conditions are satisfied.
Although Section 219 was introduced as a relieving measure it might not operate to the taxpayer’s advantage.
The facts are the same as the example in CG58622 but ICTA88/S219 applies to the purchase of own shares. The capital gain is computed as follows.
|less||cost (31.3.82 value)||200,000|
|Tax & 40%||= £166,880|
Therefore, Mr Lewis has a higher tax bill, £166,880 compared with £120,000, and no capital loss.