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HMRC internal manual

Company Taxation Manual

Distributions: purchase of own shares: later bonus issue

CTA10/S1022 covers the situation where a company repays share capital and subsequently makes a bonus issue of shares (see CTM15420). In appropriate circumstances the bonus issue is treated as a qualifying distribution.

Where a company carries out a purchase of own shares, to which CTA10/S1033 treatment may or may not apply, a repayment of share capital results. If a later bonus issue is made:

  • by certain close companies at any time after the purchase of own shares,

or

  • by other companies within 10 years of the purchase of own shares,

there will be a distribution under CTA10/S1022 (3) up to the amount of the repayment of share capital that arose from the purchase of own shares. This is not affected by the granting of clearance under CTA10/S1044. A distribution under CTA10/S1022 will arise even if the member receiving the bonus issue is not the member who received the repayment of share capital on the purchase of own shares.