There are a number of ways for both private and public. How to handle purchase of own company shares. The big read. Insight and analysis.

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1 Insight and analysis The big read How to handle purchase of own company shares Speed read Where a company purchases its own shares, it is commonly referred to as a share buyback. A share buyback may be desirable for example where an existing shareholder wishes to sell some or all of their shares and the other shareholders are unable or unwilling to purchase them. For a company to buy back its shares it must follow the procedures set out in Part 18 of the Companies Act Failure to comply can lead to the buyback being declared invalid. In extreme cases the buyback could be unwound meaning the repurchased shares would be treated as still in issue and still held by the original shareholder(s). In addition, failure to comply constitutes an offence being committed by the company and every officer in default. An officer in default is liable to a prison term of up to two years or an unlimited fine, or both so it s crucial to get this right. Paula Tallon Gabelle Paula Tallon is managing partner of Gabelle LLP, which provides independent tax support for accountants and other professionals. Paula s areas of expertise include company reorganisations and reconstructions and other tax issues facing OMBs. paula.tallon@gabelletax.com; tel: Paul Howard Gabelle Paul Howard is a director at Gabelle LLP, providing independent tax support for accountants and other professionals. Paul advises on direct tax issues affecting owner managed businesses. paul.howard@gabelletax.com; tel: Adam Bradley Taylor Vinters Adam Bradley is a partner and head of the corporate team at Taylor Vinters LLP. He regularly advises early stage and established companies in a number of sectors, in particular the technology sector, on share ownership incentive plans, option schemes, funding rounds and exits. adam.bradley@taylorvinters.com; tel: There are a number of ways for both private and public companies to buy back their shares. This article focuses on the most common type of buyback, a buyback by a private company out of distributable profits. It is intended for use as a practical guide to the legal and tax issues that need to be addressed on a buyback. Legal issues A share buyback by a private company will almost always be an off-market purchase. An off-market purchase is one where either: the shares are not bought on a recognised investment exchange (as defined in Part 18 of the Financial Services and Markets Act 2000) (a recognised investment exchange ); or the shares are bought on a recognised investment exchange but the shares are not subject to a marketing arrangement on that exchange. There are three ways a private company can finance a buyback: out of distributable profits; from a new issue of shares; or out of capital. Off-market purchase out of distributable profits What are distributable profits? Distributable profits are a company s profits available (if any) for the purpose of distribution in accordance with the Companies Act 2006 (CA 2006) s 830(1). A company will have profits available for distribution if its accumulated, realised profits (so far as not previously used by distribution or capitalisation) are greater than its accumulated, realised losses (so far as not previously written off in a reduction or reorganisation of capital). When a company purchases its own shares, the shares must be paid for in full at the time of the buyback (CA 2006 s 691). It is therefore advisable for a company to take the necessary steps to ensure that it has sufficient distributable profits prior to the buyback. This can be done by checking its relevant accounts which are either: the company s most recent annual accounts; specially prepared interim accounts where the most recent annual accounts cannot justify the distribution; or specially prepared initial accounts when the distribution is soon after incorporation. As noted above, for a share buyback, the shares must be paid for in full at the time of the repurchase. This can result in cash flow problems for the company and a way to get around that (and a fairly common scenario) is for the company to enter into a subsequent loan arrangement with the shareholder it has bought back its shares from. For example, the company could buy back its shares from one of its shareholders for 50,000. There are various things that need to be considered to make sure the company is not in breach of CA 2006 s 691, for example, it is important that the cash actually moves from the shareholder to the The shareholder could then provide a loan (which must be separate to the buyback) for 40,000 to be repaid by the company in a series of tranches. The impact of a loan on the tax position needs to be considered. Pre-buyback considerations It is important to check a company s articles before a buyback is made. If a company s articles contain restrictions or prohibitions on buybacks they must be amended prior to the buyback to remove any provisions that might prevent it this includes pre-emption provisions and express restrictions on financial assistance. This will usually be possible by special resolution. Share buyback contract The share buyback contract is the contract between the company and the shareholder(s) whose shares are being repurchased. There must be a share buyback contract for a company to make an off-market purchase of its own shares and the terms of the contract may need to be approved by a resolution of the company s shareholders March 2016

2 Insight and analysis Post-buyback requirements These include: Company books: Once a company has bought back its shares, they will usually be cancelled immediately both reducing the share capital of the company and increasing the proportionate shareholdings of the remaining shareholders. The register of members will need to be updated accordingly. Companies House filings: The following may need to be filed at Companies House: a form SH03 (Notification of share buyback) duty stamped by the Stamp Office (stamp duty is payable for repurchases of over 1,000 at the rate of 0.5%) within 28 days beginning with the date that the shares are returned to the company; if the shares are cancelled on repurchase, a form SH06 (Notification of cancellation of shares) within 28 days beginning with the date that the shares are returned to the company; and/or if a special resolution was required to approve the buyback agreement, a copy of such authorisation. Document retention: A copy of the share buyback contract must be kept available for inspection by the company s shareholders for at least ten years from the date that the buyback is completed. Alternative funding methods Where a company does not have sufficient distributable profits (or where it decides not to use them), there are other ways to fund a buyback. Fresh share issue: A company can issue new shares. A necessary formality is that the new shareholders must be entered into the register of members of the company before the proceeds of the issue are used to repurchase any shares. The share issue must be made for the purpose of funding the buyback so it is usually prudent to carry out the repurchase within a few months of the new issue to demonstrate this relationship (although there are no time scales set out in the CA 2006). The shares bought back must be cancelled immediately upon their return to the Buyback out of capital: This option is only available to private companies and it is only available if they have exhausted all available profits and any proceeds of a new issue of shares. Furthermore, this option is limited to an amount up to (the permissible capital payment provisions ) an aggregate purchase price of the lower of: 15,000; or the nominal value of 5% of its fully paid share capital as at the beginning of the then current financial year. The steps plan for buybacks out of capital is the same as the one set out above for buybacks out of distributable profits except, in addition, the requirements set out below need to be completed (as set out in CA 2006 Part 18 Chapter 5): each director must produce a statement in the form prescribed by article 5 of the Companies (Shares and Share Capital) Order, SI 2009/388, confirming that the company is solvent and specifying the amount payable for the shares; each solvency statement must be supported by an auditors report confirming the reasonableness of the statement; the shareholders must pass a special resolution approving the buyback within one week of the date of the solvency statement(s); the company will need to publish a notice in the Gazette within one week of the shareholders resolution stating that the company has approved a payment out of capital for the purpose of buying back its own shares and giving certain other prescribed information; a further notice must be published in a national newspaper or written notice must be given to each creditor of the company; from the day on which the Gazette notice is published or (if earlier) the date that notice is given to creditors, the directors statement and auditor s report must be available for inspection by all members and creditors of the company for five weeks; and the actual payment out of capital must be made no earlier than five weeks after the date on which the shareholders resolution is passed and no later than seven weeks after that date. The company must also ensure that it makes the following additional filings at Companies House: the special resolution within 15 days of it being passed; the directors statements and auditors reports no later than the day the Gazette notice is published or (if earlier) the day on which the national newspaper or creditors are given notice; and confirmation of where the directors statements and auditors reports can be inspected if not at the company s registered office. Payment on redemption The case of BDG Roof-Bond Ltd (In Liquidation) v Douglas [2000] 1 BCLC 401 represents the first time that the courts suggested companies could pay for shares with anything other than cash. It was held that the definition of payment on redemption in the CA 2006 is not limited to payment in money and that there is no policy reason for non-cash assets or a set-off against a liability to be deemed due consideration for repurchased shares. The future The Department for Business, Innovation & Skills published guidance in April 2015 which confirmed that the government s intention is to this year (2016) carry out a full post-implementation review of the Companies Act 2006 (Amendment of Part 18) Regulations, SI 2013/999, as amended by the 2015 regulations (SI 2015/532). There may well, therefore, be change on the horizon. Where a company does not have sufficient distributable profits (or where it decides not to use them), there are other ways to fund a buyback Tax issues A purchase of own shares by a private limited company can be a very effective way to deal with a shareholder s exit. The funds used to buyout the exiting shareholder come directly from the company so will only have been subject to corporation tax, whereas if the remaining shareholders buy the shares, they are generally acquired out of their post-tax income. For the individual who has disposed of their shares, the proceeds are typically income unless it is possible to meet the conditions for unquoted trading companies set out in CTA 2010 ss so that capital gains tax treatment is available. Any references below to tax legislation are to CTA 2010 unless otherwise stated. 4 March

3 Insight and analysis Distribution treatment Where a company purchases its own shares, any payment to the shareholder in excess of the subscription price is treated as a distribution. Section s 1000(1)B states: Any other distribution out of assets of the company in respect of shares in the company, except however much (if any) of the distribution: (a) represents repayment of capital on the shares; or (b) is (when it is made) equal in amount or value to any new consideration received by the company for the distribution. For the purposes of this paragraph it does not matter whether the distribution is in cash or not. Consider an example where Jane subscribed for 100 ordinary 1 shares in Bird Technologies Ltd a few years ago and the company is now repurchasing those shares for 10,000. The amount of the distribution is 9,900 (i.e. 10,000 less 100). What would be the case if the shares were subscribed for at a premium of say 20p per share? In this example the distribution would be 9,880 (i.e. 10,000 less 120). This applies even if the shareholder acquired the shares by way of a purchase from another shareholder. In our example, if Jane had bought the shares second hand for 5,000 and the original subscription price of those shares was 1,000, the amount of the distribution would be 9,000. Although there is a distribution chargeable to income tax on the share repurchase, there is also a disposal for CGT purposes. The proceeds are the total amount of the consideration received for the shares less any amount that is subject to income tax, per TCGA 1992 s 37: (1) There shall be excluded from the consideration for a disposal of assets taken into account in the computation of the gain any money or money s worth charged to income tax as income of, or taken into account as a receipt in computing income or profits or gains or losses of, the person making the disposal for the purposes of the Income Tax Acts. The base cost will be deductible in calculating the gain in the usual way. See Examples 1 and 2 below. Distribution treatment Example 1 In 2013 Susan subscribed for 1,000 ordinary 1 shares in Five Technologies Ltd at a premium of 30p per share. The business has been fairly successful but Susan wishes to exit and the company has to buy back her shares for 80,000. There are sufficient reserves in the Susan s tax treatment is as follows: Income tax: Distribution 78,700 ( 80,000 less 1,300) Capital gains tax: Proceeds 1,300 ( 80,000 less 78,700) Original cost 1,300 Gain is nil Example 2 John is also a shareholder and he acquired 500 ordinary 1 shares from another shareholder in 2014 for 20,000. These shares were originally subscribed for at a premium of 30p per share. The company has agreed to buy back his shares for 40,000. John s tax treatment is as follows: Income tax: Distribution 39,350 ( 40,000 less 650) Capital gains tax: Proceeds 650 ( 40,000 less 39,350) Original cost 20,000 Capital loss 19,350 In example 2 above, John has an income tax liability on the distribution. He is not able to reduce this liability by the capital loss. Instead the capital loss can be offset against gains arising in the same tax year or it can be carried forward against future gains. Furthermore, John cannot use the share loss relief under ITA 2007 s 131 as he was not the original subscriber. Capital treatment Although the default position is that consideration for a purchase of own shares in excess of the capital subscribed for the shares is taxed as a distribution, in the right circumstances a purchase of own shares can be taxed entirely under CGT principles. In order to secure this treatment a number of requirements must be met, and these are set out in ss Section 1033 sets out the parameters, the fundamental requirement being, first, that the company must be an unquoted trading company or the unquoted holding company of a trading group (unquoted for this purpose includes AIM listed companies), and, secondly, that either condition A or condition B is met. Benefit to trade Condition A is that the purchase of shares is made wholly or mainly for the purposes of benefiting a trade carried on by the company or any of its 75% subsidiaries. Statement of Practice 2/82 sets out a number of situations where HMRC are likely to accept that the trade benefit test is met, and includes, for example, the retirement of the controlling shareholder to make way for new management. However, there is case law which demonstrates how the trade benefit test should operate. In Moody v Tyler [2000] STC 296, the company had made a loan of 50,000 to the taxpayer when he resigned as a director. Six years later, the company bought back some of his shares in the company for 50,000 which was used to repay the loan. HMRC asserted, and the court agreed, that the purchase of shares was not made to benefit a trade carried on by the company but rather to facilitate the repayment of the loan from the In Allum and Another v Marsh [2005] STC(SCD) 191, a husband and wife owned nearly all the shares in a company, with their son having a small minority shareholding. The company owned its premises, which had development potential, and the parents saw this as a way of funding their retirement. The company sold the premises and bought back the parents shares, leaving the son as sole shareholder. They sought CGT treatment for the purchase of shares by the company and argued that they had withdrawn from the business to allow their son to take over the trade. However, after the company had sold its premises it had nowhere suitable from which to carry on its trade and there was no working capital left in the company after the parents shares had been bought back. With no premises there was virtually no trade to benefit from the purchase of shares by the The special commissioners agreed with HMRC and decided that the purpose of the purchase of shares by the company was to fund the parents retirement. Discharging IHT liability Condition B is that the whole or substantially the whole of the payment is applied by the person to whom the payment is made in discharging a liability of that person for IHT charged on a death, and is applied within two years of the death. Furthermore, the purchase of shares must be the only way in which the IHT liability could have been paid without undue hardship. Condition B applies only in very restricted circumstances, and in practice nearly all share purchases rely on condition A March 2016

4 Insight and analysis Assuming that the requirements in s 1033 can be met, there are number of further requirements which must be met before CGT treatment can apply. Requirement as to residence (s 1034) The seller must be resident in the UK in the tax year in which the purchase is made. If shares are held through a nominee, the nominee must be resident in the UK in the tax year in which the purchase is made. The residence of personal representatives (PR) is taken to be the residence of the deceased immediately before death. It should be borne in mind that if the seller is not resident in the UK and the purchase of shares is treated as a distribution, there is unlikely to be a UK income tax liability (ITA 2007, ss 810 to 814). However, the tax position in the country of residence would have to be considered. Requirement as to period of ownership (s 1035) The shares must have been owned by the seller throughout the five years ending with the date of purchase. Where shares of the same class have been acquired at different times, they are treated as being disposed of on a FIFO basis. However, any previous disposal of shares of that class is assumed to be taken from shares acquired later rather than earlier. See example 3. Example 3: Period of ownership John holds 1500 ordinary shares in Jones Ltd. The company is now looking to repurchase 800 shares. The shares were acquired as follows: shares shares shares In 2014 he sold 600 shares to an unconnected third party. This earlier disposal is identified with the 500 shares acquired in 2010, and the balance of 100 with the 2008 acquisition (LIFO). This leaves him with 500 shares acquired in 2007 and 400 shares acquired in The 800 repurchased by the company in 2016 identified with the 500 shares acquired in 2007, and 300 of the shares acquired in Where shares were acquired as a result of a reorganisation of share capital, unless the shares were allotted for payment or were acquired under a stock dividend, the date of acquisition is determined by reference to the original shares. Where shares are transferred between spouses or civil partners who are living together at the time of transfer, the period of ownership of the transferor is aggregated with the period of ownership of the transferee. Where shares are acquired under the will or intestacy of the previous owner, or the seller is the PR of a previous owner, the required period of ownership is three years instead of five. Requirement as to reduction of seller s interest as shareholder (s 1037) If, immediately after the purchase, the seller owns shares in the company, the seller s interest as a shareholder must be substantially reduced. In applying this test shareholdings of associates must be taken into account. Associated persons are defined in ss and include the following: spouses and civil partners who are living together; individuals under the age of 18 and their parents; a person connected with a company (as defined in s 1062) is associated with that company and with any company controlled by that company, and those companies are associates of that person; if a person is connected with company A, and has control of company B, company B is an associate of company A; and if a person is accustomed to act on the directions of another in relation to the affairs of a company, those two persons are associates with one another in relation to that The seller s interest in the shares is substantially reduced if the seller s subsequent interest is not more than 75% of the seller s prior interest. The seller s subsequent interest is the total nominal value of the shares owned by the seller immediately after the purchase, expressed as a fraction of the issued share capital of the company at that time. The seller s prior interest is the total nominal value of the shares owned by the seller immediately before the purchase, expressed as a fraction of the issued share capital of the company at that time. See example 4. Example 4: Reduction of seller s interest as shareholder Assume a company has issued share capital of ordinary shares which are held as follows: Mr A 20 Mrs B 15 B 40 C 20 D 5 Total 100 Mr A and Mrs A are husband and wife, and D is their adult daughter who works in the business. Mr and Mrs A are associates, but as D is over 18 years of age she is not an associate of Mr or Mrs A. The company wishes to buy back Mrs A s shares and needs to establish whether her interest in the company would be substantially reduced. Mrs A s prior interest is 35/100, and her subsequent interest is 20/80 = 25%. 75% of her prior interest is 26.25%, which means that the substantial reduction test has been satisfied. The formula below can be used to calculate the minimum number of shares to repurchase so the substantial reduction test is met. The answer should always be rounded up. S x C 4C 3S where: S = the shareholding of the vendor before the repurchase; and C = the issued share capital before the repurchase. Applying this to the example above: 35 x 100 4(100) 3(35) the result is so a minimum of 12 shares need to be repurchased to meet the test. Effect of entitlement to profits (s 1038) The seller s interest as a shareholder is not taken to be substantially reduced for the purposes of s 1037 if the seller would, if the company distributed all its profits available for distribution immediately after the purchase, be entitled to a share of those profits, and that share, expressed as a fraction of those profits, is more than 75% of the corresponding fraction immediately before the purchase. 4 March

5 Insight and analysis Profits available for distribution are defined in CA 2006 s 830(2) as its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made. The basis of the calculation is set out in s 1038(4) and (5). For the purposes of establishing the seller s interest in the profits available for distribution, those profits are increased by 100, and where the seller is entitled to periodic distributions of fixed rates or amounts, profits are increased by those amounts. This addresses the situation where the company does not have reserves or sufficient reserves to make fixed rate distributions. See example 5. Example 5: Effect of entitlement to profits Casper Technologies Ltd has 100,000 ordinary 1 shares and 5,000 10% preference shares in issue. These shares are held as follows: Mary: 18,000 1 ordinary shares and 5,000 preference shares George: 48,000 1 ordinary shares Susan: 34,000 1 ordinary shares Whether this test is met depends on the price of the repurchased shares and the level of distributable profits. The intention is for Casper Technologies Ltd to acquire 9,000 shares from Mary for 15,000 If the distributable profits were 20,000, the profits for the purposes of the test would be: Distributable profits 20,000 Statutory addition 100 Preference dividend 500 Total: 20,600 Mary s entitlement prior to the purchase is: Preference dividend % of the balance of 20,100 = 3,618 This is 19.99% of the total. After the purchase the entitlement is: Preference dividend % of the balance of 20,100 = 1,988 2,488 This is 12.07% of the total which is less than 75% of the original entitlement so the test is met. Consultation on company distributions In the recent consultation on company distributions some questions were asked in respect of a company purchase of own shares. In particular, the government is concerned that the above tests connection and substantial reduction do not sit easily with the benefit to trade test. It is concerned that a shareholder can dispose of some of their shareholding and obtain capital treatment while still having a significant influence on the business. It is not clear what is being proposed but perhaps it will be dealt with by a more rigorous examination of the benefit to trade test when clearances are being reviewed. Payment in instalments A common problem encountered by companies wishing to purchase shares from a shareholder is that they have insufficient cash or reserves to fund the whole of the purchase. It is possible to carry out a phased purchase of shares, but this would have to take account of the substantial reduction rules in s 1037 and s 1040, and the connection test in s This issue was addressed in ICAEW Technical Release 745 which gave rise to the concept of effecting a purchase of own shares by way of a single contract for the purchase of shares with multiple completion dates. Beneficial interest in the shares passes at the date of the contract, so the shareholder has no further entitlement to vote or to receive dividends declared after the date of the contract. For the avoidance of doubt, these rights could be removed from the shares that remain held by the exiting shareholder pending completion. The shareholder will be treated as disposing of all the shares on exchange of contracts in accordance with TCGA 1992 s 28. The clearance application should make reference to TR 745 and should set out the terms under which the purchase will be effected. As completion takes place in respect of a certain number of shares at set dates the shareholder will become a creditor of the company, so the connection test in s 1042 will not be breached by virtue of the shareholder becoming a loan creditor. Requirements where purchasing company is a member of a group (s 1039) This requirement applies where the purchasing company is, immediately before the purchase, a member of a group. A group for this purpose is defined in s 1047 as a company which has one or more 75% subsidiaries together with those subsidiaries. If immediately after the purchase the seller owns shares in one or more group companies, the seller s interest as a shareholder in the group must be substantially reduced. Section 1040 sets out how the substantial reduction test is applied to the seller s interest in a group of companies. The seller s interest is calculated as follows: (a) Express the total nominal value of the shares owned by the seller in each relevant company as a fraction of the issued share capital in each relevant company; (b) Add together the fractions obtained in (a); (c) Divide the total by the number of relevant companies, including any in which the seller owns no shares. Any shares held by associates of the seller must be taken into account. See example 6 for an illustration of how this calculation operates. Example 6: Applying the substantial reduction test to the seller s interest in a group of companies The shares in M Ltd are owned: A 40 B 30 C 30 Total 100 The shares in P Ltd are owned: A 20 M Ltd 80 Total 100 M Ltd buys back 30 of A s shares, and A wants to ensure that he satisfies the substantial reduction test. As M Ltd owns more than 75% of the shares in P Ltd the two companies are a group for the purposes of s A s interest in the group immediately before the purchase is (40/ /100) 2 = 30%. A s interest in the group immediately after the purchase is (10/ /100) 2 = %. His interest in the group will be substantially reduced if his interest after the purchase is not more than 75% of his interest before the purchase, i.e. 75% x 30% = 22.5%. Therefore he meets the substantial reduction test March 2016

6 Insight and analysis Effect of entitlement to profits (s 1041) This test mirrors the test in s 1038, and ensures that the seller s interest in the profits of the group is substantially reduced immediately after the sale of shares. Other requirements: connection (s 1042) The seller must not, immediately after the purchase, be connected with the company making the purchase or any other company which is a member of the same group as that Connected persons are defined in s A person is connected with a company if the person directly or indirectly possesses or is entitled to acquire more than 30% of: the issued share capital of the company; the loan capital and the issued share capital of the company; or the voting power in the Loan capital is ignored if the person acquired or became entitled to acquire the loan in the course of a money lending business and takes no part in the management of the A person is connected with the company if that person (directly or indirectly) possesses or is entitled to acquire such rights as would, in the event of a winding up or in any other circumstances, entitle that person to receive more than 30% of the assets of the company which would then be available for distribution to the equity holders of the Where there are plans for the exiting shareholder to lend the money back to the company careful consideration needs to be given to this test to ensure that the 30% threshold is not breached by virtue of the loan. Equity holder is defined in ss There is no policy reason for non-cash assets or a set-off against a liability to be deemed due consideration for repurchased shares Other requirements: part of scheme or arrangement (s 1042) The purchase must not be part of a scheme or arrangement which is designed, or likely, to result in the seller or an associate of the seller having disqualifying interests in the Interests in the company are disqualifying interests if the seller would be regarded as connected with the company or would not meet the substantial reduction tests in s 1037 or s 1039 if the person in question had those interests immediately after the purchase. A transaction occurring within one year after the repurchase is treated for the purposes of this requirement as part of a scheme or arrangement of which the repurchase is also a part. There is a relaxation in s 1043 where the seller does not meet the substantial reduction, profit entitlement or connection requirements, but the seller proposed or agreed to the purchase in order that the requirements can be met by an associate of the seller. Clearance procedure (s 1044) A company can apply for clearance before making a payment for the redemption, repayment or purchase of its own shares. Clearance can be sought that, and HMRC will notify the company that they are satisfied that either the payment is one to which s 1033 applies, or the payment is one to which s 1033 does not apply. The application for clearance must be in writing and must contain particulars of the transaction. Usually clearance would be sought at the same time under ITA 2007 s 701 to ensure that HMRC is satisfied that no counteraction notice would be issued in respect of transactions in securities. HMRC has to reply within 30 days, either requesting further information or giving its decision. Statement of Practice SP 2/82 provides a pro-forma clearance application under s A purchase of own shares by a private limited company can be a very effective way to deal with a shareholder s exit Information and returns (s 1046) Whenever a company makes a payment to which s 1033 applies it must, within 60 days of the payment, make a return to HMRC giving details of the payment, and the circumstances by reason of which s 1033 is regarded as applying to it. If the company treats a payment made by it as one to which s 1033 applies and in relation to which Condition A (the benefit to trade test) is met, and a person connected with the company knows of any scheme or arrangement referred to in s 1042 that affects the payment, that person must notify HMRC. The notice must contain particulars of the scheme or arrangement, and must be given within 60 days after the person first knows of both the payment and the scheme or arrangement. Final thoughts The purchase of own shares by a private company is a complex area and there are number of potential pitfalls in relation to both the tax and legal aspects. However where there are the correct circumstances it is a useful mechanism for dealing with the exit of a shareholder without unnecessary tax costs. Most read on taxjournal.com: 1. Employment tax: preparing for 2016/17 (Mark Groom, ) 2. Quarterly transfer pricing briefing: 2016 (Shiv Mahalingham, ) 3. Tax disputes in 2016 (Rupert Shiers, ) 4. The European Commission s anti-tax avoidance package (Heather Corben, ) 5. A corporation tax system under strain (David Smith, ) 4 March

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