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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Distributions: purchase of own shares: special treatment for unquoted companies

CTA10/S1033

In certain circumstances, CTA10/S1033 provides that the distributions legislation does not apply to a payment made by an unquoted company (see CTM17507) on redeeming or purchasing its own shares.

The effect is that the vendor is treated as receiving a capital receipt. However, if the vendor is a share dealer, the receipt will still be trading income.

Clearance applications under CTA10/S1044 are the responsibility of the Clearance and Counteraction Team, Anti-Avoidance Group (see below). The clearance procedure is intended to help companies but is not a statutory requirement.

Where a person claims that CTA10/S1033 applies but there is apparently no clearance notice officers should telephone the Clearance and Counteraction Team, Anti-Avoidance Group on 03000 589004.

Advance Clearance

A company proposing to make such a payment may ask HMRC to confirm either that CTA10/S1033 will apply, or that it will not apply. SP2/82 explains the procedure to be followed.

An officer who receives a clearance application should, on the day the application arrives, send it to:

HM Revenue & Customs
Clearance and Counteraction Team, Anti-Avoidance Group
8t h floor Bush House
Strand
London WC2B 4RD
Telephone 03000 589004
Fax 03000 589802.This address is for internal mail only. Public contact details are available at http://www.hmrc.gov.uk/cap/index.htm.

The applicant should be notified in the following terms:

“I refer to the application for clearance you sent me. Please note that all such applications must be made to the Commissioners and not to the local office. I have sent the application to the Clearance and Counteraction Team, Anti-Avoidance Group. I am advised that the 30 day time limit within which the Commissioners are expected to reply will begin when the application is received by the Group.”

Clearance applications under this and other provisions may be combined. These include TCGA92/S138 (CG52631) and TCGA92/S139 (5) (CG52752) - company reconstructions; CTA10/S748 (CTM36880) - transactions in securities; and CTA10/S1091 (CTM17270) - demergers.

They should where appropriate be forwarded to the Clearance and Counteraction Team, Anti-Avoidance Group together.

Where the Commissioners give or refuse clearance, the Clearance and Counteraction Team, Anti-Avoidance Group will notify the company’s tax office. The team will explain how to request a copy of the application and any supporting documents if not already provided. Officers pursuing enquiries into the company’s CT return or the vendor’s IT return should ask the team for a copy of the papers. The company’s return (see CTM17580) and accounts should reflect the transactions which were undertaken.