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HMRC internal manual

Company Taxation Manual

Distributions: purchase of own shares: shares issued at a premium

CTA10/S1025 (1) and (2) provide that;

  • where a company issues share capital at a premium representing new consideration,


  • the amount of the premium is treated as forming part of the issue price of the share capital when determining whether a distribution the company subsequently makes in respect of shares is to be treated as a repayment of share capital.

CTA10/S1025 (3) provides however that a share premium cannot be applied as above if it has already been treated as new consideration under CTA10/S1115 (2) and (3) for the purpose of paying up further share capital (see CTM15140).

Where CTA10/S1025 (3) does not prevent CTA10/S1025 (1) and (2) from operating, any premium the company received on the issue of shares is treated as part of the repayment of share capital on the purchase of own shares.

If the company shares repurchased can be identified with a particular share issue, then the repayment of capital will include any premium the company received on that share issue. If the shares purchased cannot be identified in this way, then averaging can be used to calculate the repayment of share capital. The total payment for the share capital will include any such premium.