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Where Taxpayers and Advisers Meet

Purchase of own shares

simplytax
Posts:86
Joined:Wed Aug 06, 2008 3:34 pm
Purchase of own shares

Postby simplytax » Wed Nov 25, 2020 1:36 pm

To obtain capital treatment for CGT the purchase must be for the benefit of the trade. SP2/82 refers to examples of an unwilling shareholder such as an outside shareholder who provided equity finance and now wishes to withdraw, or a controlling shareholder who is retiring as a director and wished to make way for new management.

A small private company has a shareholder base comprising 6 directors and their wives with 80% of the shares held equally between them and one corporate shareholder with 20%. Four of the directors wish to retire and exit along with their wives, to leave the two younger directors and wives as shareholders along with the corporate shareholder to take the company forwards and introduce other employees as shareholders.

Is this likely to meet the trade benefit test for all the exiting shareholders including the wives on the basis older shareholder directors are retiring to make way for new management to secure the future of the business?

Why does SP2/82 refer to an “outside” shareholder or a “controlling” shareholder? The four directors and their wives hold a combined 53%.

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