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HMRC internal manual

Capital Gains Manual

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 the employee meets the same condition as a seller in CTA10/S1033 and the subsequent requirements, the sale by the employee of shares is treated as a capital transaction.

Where capital treatment is appropriate, the relevant disposal value for CGT purposes where shares are sold via a single unconditional contract is the full amount receivable for all the planned instalment payments. This can be amended at a later date if the full amount is not actually received.

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).