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HMRC internal manual

Company Taxation Manual

Particular topics: transactions in securities: condition A

Condition A is met where, as result of the transaction or transaction, the person receives relevant consideration in connection with

a. the distribution, transfer or realisation of assets of a close company,

b. the application of assets of a close company in discharge of liabilities, or

c. the direct or indirect transfer of assets of one close company to another close company.

and the person does not pay or bear income tax on the consideration.

Relevant consideration – condition A

Where a. or b. above applies the relevant consideration is that which

  • is, or represents, the value of assets

    • which are available for distribution, or
    • which would have been available for distribution but for anything done by the company,
  • is  received in respect of future receipts of the company, or
  • is, or represents, the value of trading stock.

Assets for this purpose do not include amounts which are shown to represent a return of sums paid by subscribers on the issue of securities.  To the extent that the assets can alternatively be shown to represent a return of distributable profits, for example where there are distributable reserves in the P&L account, this exclusion is unlikely to apply.


  • Holdingcompany Ltd reduces its share capital by £1m and pays that amount to its members.
  • At the time of the reduction in share capital it has distributable reserves of £2m.

Here the whole £1m may be relevant consideration.

Where c. above applies, the relevant consideration is defined as for condition B – see CTM36823.