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Where Taxpayers and Advisers Meet

Capital treatment of unquoted company buy back of shares

Cathyne
Posts: 1
Joined: Thu Mar 14, 2019 9:14 pm

Capital treatment of unquoted company buy back of shares

Postby Cathyne » Fri Mar 15, 2019 10:28 am

Some ordinary shares in a family company are held in a discretionary trust.

assuming the the buy back meets the requirements, if the shares are purchased directly from the Trust, will capital treatment apply

or

if the shares are appointed to the beneficiaries and a gift holdover election is made
then, in the hands of the beneficiary, will the buy back by the company of these same shares still qualify to be treated as capital, rather than an income distribution.

Thanks you

AGoodman
Posts: 711
Joined: Fri May 16, 2014 3:47 pm

Re: Capital treatment of unquoted company buy back of shares

Postby AGoodman » Fri Mar 15, 2019 11:42 am

The default position on a buy-back is income tax treatment. It is possible to get capital treatment but you need to meet various conditions including the requirement that the buyback will benefit the trade carried on by the company (see Statement of Practice 2/82), minimum holding periods, selling 75%+ of the holding and others.

A gift with holdover may have implications for the minimum holding period.

SteLacca
Posts: 432
Joined: Fri Aug 07, 2015 2:17 pm

Re: Capital treatment of unquoted company buy back of shares

Postby SteLacca » Wed Mar 20, 2019 3:02 pm

There's a clearance procedure: https://www.gov.uk/government/publications/seeking-clearance-or-approval-for-a-transaction


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