Tax and Duty Manual Part 06-09-01 has been updated to clarify the circumstances in which Revenue will regard a buy-back of shares as benefiting the trade.
The following instructions outlines the basic principles involved in share buy-backs and the procedures to be followed in Districts;
- buy-back (including the redemption, repayment and purchase) of its own shares by a quoted company (or of its own shares by a subsidiary of a quoted company) is not treated as a distribution. Consequently, the disposal of the shares by the shareholders concerned is within the charge to capital gains tax.
- For accounting periods ending on or after 31 January 2008 costs incurred by a company in buying back its own shares are not allowed as a deduction for tax purposes. However, subject to section 81(2)(n), this provision does not apply to so much of any payment as consists of expenditure incurred by a company to the extent that it is incurred on shares acquired by the company and given by it as consideration for goods or services, or to an employee or director of the company.
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The Team at Jefferson