Company Buyback and then reissuing shares

Company Buyback and reissuing shares to the same Shareholder

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I have a client, with many shareholders, 1 shareholder is going through a company buyback for the whole of there shares in the company and they will have no connections with the business moving forward, which I have gained clearance from HMRC to do so and they are on a payment plan to pay them the money back and a chunk of shares cancelled each tax year over 3 years, so that is all sorted but I now have another shareholder who wants to sell only some of his shares, receive two payments one in this tax year and the rest in the next, and then build his shares back up further down the line, I need to get clearance for this with HMRC, but Im wondering will it affect the agreement we already have in place with HMRC?   This new proposal does meet all the criterias for the buyback and he will resign as a Director, but is he able to rebuild his shares back up and straight away or is there a time bar into which he has to wait before he can commence with any such transactions?  Has anyone got any advice on this please?

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By Tax is always taxing
27th Feb 2023 13:35

Why?
What price does he think he is going to sell them at compared to what he is going to 'buy' these shares back at?

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Replying to Tax is always taxing:
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By jennywren100
27th Feb 2023 14:14

I think what he is trying to do is release some money to himself to complete his house renovation, but as some of his family are also involved in the company, they will transfer shares back to him once the previous shareholder has cancelled some of his shares in the company. There thought is they can issue more shares and distribute evenly between the shareholders left, including this one who is trying to sell some.

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By David Ex
27th Feb 2023 14:39

No experience but difficult to see how condition A is satisfied.

https://www.gov.uk/guidance/clearance-applications-and-exempt-distributi...

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Replying to David Ex:
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By jennywren100
27th Feb 2023 15:02

Hi, thanks, he would meet the requirements, as his interest would be substantially dropped in selling the shares he is on about and his connection with the company is less than 30% of the issued share capital and he would be entitled to less than 30% of the assets if the company woundup, even if his adult son transferred shares to him. So he would still meet the legislation, but my concern is would he have to leave it so long before the transfer of shares or is there no such requirement, I cant imagine you can sell, receive a lump sum tax free and then get your shares transferred back to you, with no implication. I would assume that HMRC would see it as a dividend and not as a capital gains??

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Replying to jennywren100:
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By Tax is always taxing
27th Feb 2023 15:12

Did you actually read the requirements given your answer to me above:-

Condition A: purchase benefiting a company’s trade
To be eligible to make a clearance application, the following must be satisfied:

- the purchase must be made wholly or mainly for the purpose of benefiting the trade carried on by the company or any of its 75% subsidiaries
- the shareholding interests of the seller and their associates in the company (and group, if appropriate) must be substantially reduced
- the seller and their associates must not be connected to the company after the purchase takes place
- the purchase does not form part of a scheme or arrangement where one of the main purposes is to enable the seller to participate in the profits of the company without receiving a dividend and/or avoiding tax

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Replying to Tax is always taxing:
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By jennywren100
27th Feb 2023 16:10

Apologies see your point, we had thought it would be because of his continued tradesmenship but actually that makes no difference as he’s already offering that. And I’m sure I didn’t see the last point, thanks that’s what this group is all about!

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Replying to jennywren100:
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By More unearned luck
27th Feb 2023 15:35

How does helping the shareholder fund his house renovation benefit the trade?
It also appears to be a scheme to allow the shareholder to extract funds without them being taxed as dividends.

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Replying to More unearned luck:
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By jennywren100
27th Feb 2023 16:11

It wasn’t the fact that he was renovating his house, would help the company, but yes see your point! Think I’ve got too many people stirring the pot I’ve got a little lost, thanks

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