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Tax implications on capital reduction

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Hi there

Are there any tax implications when performing share premium reduction through the statement of solvency?

Or will the funds just become our destributabale reserves staright away?

Thanks

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By Vile Nortin Naipaan
19th Jun 2019 10:22

If, on the reduction, you make immediate payments to the shareholders as a part repayment of their capital, you have a CGT part disposal, rather than an income distribution, subject to the application of the TiS rules (which may be a significant hurdle).

If you're just making the share premium account distributable, then yes it's just a distrbutable reserve, and any subsequent distribution out of it will be taxable as an income distribution in the normal way.

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Replying to Vile Nortin Naipaan:
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By tamasv
19th Jun 2019 11:50

Do you mean from the directors perspective or the company?
From company perspective, I need to know if there is CT on the amount of share premium becoming distributable as a result of capital reduction?

Thanks

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Replying to tamasv:
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By Vile Nortin Naipaan
19th Jun 2019 11:54

No there is no corporation tax on the capital reduction. There is no tax effect for the directors either. There may be tax implications (as I have already outlined) for the shareholders.

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Replying to Vile Nortin Naipaan:
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By tamasv
19th Jun 2019 11:56

Many thanks!

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