CG58660 - Co.purchases own shares: capital treatment: Employee share schemes

This guidance deals with tax issues arising when company purchases its own shares back from employees. Where all of the conditions in s1033 CTA10 are met, the sale by the employee of shares is treated as a capital transaction.

Where capital treatment is appropriate, the relevant disposal value for capital gains tax purposes where shares are sold via a single unconditional contract is the full amount receivable for all the planned instalment payments. If the full amount is not actually received, it may be possible to amend this at a future date by making a claim under s48(1) TCGA92 that the associated payment had become irrecoverable, see CG14933.

Where a charge to tax as employment income arises in relation to employee shares the employer needs to consider whether those shares are readily convertible assets (RCA), see EIM11900.