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HMRC internal manual

Capital Gains Manual

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 CTM17500+.

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.

  Sale proceeds   700,000  
less cost (31.3.82 value)   200,000  
    Unindexed gain 500,000  
less Indexation   82,800  
    Chargeable gain 417,200  
Tax & 40%     = £166,880  

Therefore, Mr Lewis has a higher tax bill, £166,880 compared with £120,000, and no capital loss.