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HMRC internal manual

Company Taxation Manual

Distributions: purchase of own shares: repeat bonus issues

CTA10/S1022, S1026 and S1033

If a company makes a bonus issue followed by a purchase of own shares, and then another bonus issue, CTA10/S1026 is considered to apply before CTA10/S1033. This has the following consequences.

The first bonus issue operates as the first leg of CTA10/S1026. If a repayment of share capital followed it, that repayment would be treated as a distribution.

If the purchase of own shares satisfies the conditions of CTA10/S1033 it will not give rise to a distribution. The amount that CTA10/S1033 exempts from distribution treatment includes the amount that would otherwise be a distribution by virtue of CTA10/S1026 because of the earlier bonus issue.

If the company subsequently makes a further bonus issue, this would be a distribution under CTA10/S1022 if it were not for the prior operation of CTA10/S1026. This is because it would be a bonus issue following a repayment of share capital. But CTA10/S1022 does not operate on the subsequent bonus issue. This is because a payment that is prevented from being a repayment of share capital for the purposes of CTA10/S1000 (1) B (because of the operation of CTA10/S1026) is also not treated as a repayment of share capital for the purposes of CTA10/S1022.