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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Distributions: general: repayment of preference shares

CTA10/S1023 (3) (4) and (5)

The repayment of certain preference shares is not a repayment of share capital for the purposes of CTA10/S1022.

Preference shares are shares which:

  • do not carry any right to dividends other than dividends at a fixed percentage of the nominal value of the shares, and
  • carry rights in respect of dividends and capital that are comparable with those general for quoted fixed dividend shares.

CTA10/S1022 does not apply to the repayment of fully paid preference shares, if the preference shares:

  • were in issue at 6 April 1965, and continued to be fully paid preference shares from that date until their repayment, or
  • were issued since 6 April 1965 as fully paid shares wholly for new consideration that was not derived from ordinary shares, and continued to be fully paid preference shares until repayment.

Consideration ‘derived from ordinary shares’ is consideration consisting of:

  • the surrender, transfer or cancellation of ordinary shares of any company, or
  • the variation of rights in ordinary shares of any company, or
  • value derived from a repayment of share capital paid in respect of ordinary shares of any company.

For the purposes of CTA10/S1022, ordinary shares are shares other than preference shares.

Non-redeemable shares, CTA10/S1023 (1) and (2)

The issue of certain non-redeemable shares is not a bonus issue for the purposes of CTA10/S1022.

CTA10/S1022 does not apply if the bonus issue:

  • is of shares other than redeemable shares, and
  • occurs more than 10 years after the repayment of share capital.

This does not apply to a company within CTA10/S739 (broadly an unquoted or closely controlled company).