Share buy-back - Tax position

I have a client (A) who owned 50% of a private limited company. A and the other 50% owner (B) disagreed on how tthe company should operate and it was decided that the company would buy back the shares held by A.  An Off-Market Purchase Agreement was drawn up and the company paid A £70,000 for his one share that originally cost £1. The disposal would normally be treated as a capital gain for tax purposes with entrepreneurs relief available if all conditions were met. Under S.1035 Companies Act 2006 the seler (A) must have held the shares for 5 years. A has only held them for 2 years. My thoughts are that instead of a capital gain the £70.000 payment will be treated for tax purposes as a distribution. A will receive the 10% tax credit and will then be liable at the dividend rate on the gross amount..

I would appreciate any comments concerning the above.

Comments
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I think you are correct but I

micalijo |

I'd agree...

George Attazder |
George Attazder's picture

clearance & SSE for corporates

david5541 |

You can indeed ask, David ...

BKD |
BKD's picture

Thanks for your comments.

RWACEM |

....

GarethHughesFCCA |
GarethHughesFCCA's picture

5 years

hiu612 |

5 years

hiu612 |

Yes, check the paperwork

Nichola Ross Martin |
Nichola Ross Martin's picture