So sorry, I'd wrong assumed that legislation.gov.uk would default to the latest version without having to manually click on the latest version with the SI changes. I can see what you mean now as it says re. treasury shares "AND [F2(b)the purchase is made out of distributable profits" - i.e. the OR has gone.
I'd also been looking at this ACCA guidance: https://www.accaglobal.com/content/dam/ACCA_Global/Technical/Guides/comp... On p3 it states "Section 724
was amended as previously only public companies with listed shares WERE able (past tense) to hold their own shares as treasury shares". Then the immediate next sentence states "The shares allowed to be held in treasury ARE those (present tense) acquired out of distributable profits or, for private companies, with small amounts of cash". Which is a bit confusing really but just goes to show that it's always best just to go directly to the legislation (and look at the right version). Thanks for putting me on the straight and narrow :-)
"This section applies where–
(a)a limited company makes a purchase of its own shares in accordance with Chapter 4, and (b)the purchase is made—
(i)out of distributable profits, OR
(ii)with cash under section 692(1)(b)".
So that sounds to me like treasury shares can still be made even if there aren't distributable shares. And Inform Direct also state this too: "To hold shares in treasury, the shares bought back by the company must have been purchased out of distributable reserves and not out of capital, OTHER THAN the small capital payment allowed for private limited companies". https://www.informdirect.co.uk/shares/what-are-treasury-shares/#:~:text=....
So actually I think I'm back to square one - assuming my client can do this small capital payment AND keep the shares in treasury, then where does the debit go please?
Ah... I see a lightbulb coming on. I think you're saying this would be a cancellation of the shares - and then the dr entry would indeed be to share capital to reduce the overall value. As shares bought back using capital cannot be held in treasury and must be cancelled. Got it now (I think!), thank you.
If a company can make a purchase of out capital, then isn't that the same as holding its own shares - i.e. treasury shares? It sounds like the same thing to me. Apologies, I'm still not getting the concept or how to recognise in the books.
Thanks very much. That prompted me to check the treaty for one of the countries we are considering and the criteria for residency are:
1) Where a permanent home is available
2) If a permanent home is available in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests).
3) Habitual abode
4) State of which he is a National
And additionally, if a person other than an individual (i.e. my company) is a resident of both Contracting States, "it shall be deemed to be a resident of the State in which its place of effective management is situated" which is what I was expecting it to say.
At the moment, our first move overseas will likely be 6 months - 2 years. Then to a different country after that for 2-3 years at a time. So it's all very messy for me to keep changing my personal/corporate residency each time if I don't have to.
My firm is small and I only work c. 1000 hrs per year, and half of this is for 2 clients who I could go on the payroll for. I'm starting to think that if I can squeeze the majority of the remaining 500 hours or so for my other small clients into my c. 50 UK days and ensure I meet all clients/do my accounts in the UK then I can 'effectively manage' the company from the UK. Do you think this would work?
I was just wanting to maintain the status quo really as I think we'll be moving quite a bit over the next few years. And as per one of other comments, the taxpayer would generally not have dual residency so I would prefer to stick with the UK if I can engineer it.
I don't trigger the 3rd auto overseas test as my practice is quite small and I don't work enough hours but one to consider for the future thanks if I get big enough.
I was just wanting to maintain the status quo really as I think we'll be moving quite a bit over the next few years. And as per one of other comments, the taxpayer would generally not have dual residency so I would prefer to stick with the UK if I can engineer it.
I don't trigger the 3rd auto overseas test as my practice is quite small and I don't work enough hours but one to consider for the future thanks if I get big enough.
I was referring to the 2nd automatic UK test which was worded a bit differently in another flow chart as "you have a home in the UK where you were present for more than 30 days"..... but I'd forgotten one of the requirements for this one was to NOT have an overseas home as well. But I'll have enough UK ties/UK days to stay UK resident anyway.
Thanks Jon. All food for thought and some helpful tips/extra points. I actually want to remain a UK resident for personal tax purposes, and I reckon I will achieve that because I have a holiday home in the UK where I spend more than 30 days anyway so I would be automatically resident per the SRT. I'll get to grips with the local laws once I know where we are moving to.
Proving UK "residency" for banking purposes is the tricky bit I fear. I think the options are:
1) Change my business address to my UK holiday let to keep my current bank happy, but then the mail wouldn't get forwarded and I would only pick it up periodically.
2) Change my business address to a mail house to forward my mail electronically and change to a challenger bank if and when my current bank Barclays can't cope with this.
3) Change my business address to overseas to save paying a mailhouse/ditto re. the bank. HMRC is pretty much the only entity that sends me snail mail. Their response times are so bad, another few days/weeks wouldn't make much of a difference! Presumably HMRC would send post to an agent with an address in Europe/RoW but I would worry about the brown envelopes not having the right postage on and the letters not reaching me at all. I can't even call the Agent Maintainer Team to check the process here as they don't have a phone number!
Thanks - very helpful link. I did try searching AWEB to see if anyone had asked a similar query but it didn't return any results. Think I used the word 'firm' not 'practice'....
My answers
So sorry, I'd wrong assumed that legislation.gov.uk would default to the latest version without having to manually click on the latest version with the SI changes. I can see what you mean now as it says re. treasury shares "AND [F2(b)the purchase is made out of distributable profits" - i.e. the OR has gone.
I'd also been looking at this ACCA guidance: https://www.accaglobal.com/content/dam/ACCA_Global/Technical/Guides/comp... On p3 it states "Section 724
was amended as previously only public companies with listed shares WERE able (past tense) to hold their own shares as treasury shares". Then the immediate next sentence states "The shares allowed to be held in treasury ARE those (present tense) acquired out of distributable profits or, for private companies, with small amounts of cash". Which is a bit confusing really but just goes to show that it's always best just to go directly to the legislation (and look at the right version). Thanks for putting me on the straight and narrow :-)
Hmmm.... I've just checked s. 724 and it states
"This section applies where–
(a)a limited company makes a purchase of its own shares in accordance with Chapter 4, and (b)the purchase is made—
(i)out of distributable profits, OR
(ii)with cash under section 692(1)(b)".
So that sounds to me like treasury shares can still be made even if there aren't distributable shares. And Inform Direct also state this too: "To hold shares in treasury, the shares bought back by the company must have been purchased out of distributable reserves and not out of capital, OTHER THAN the small capital payment allowed for private limited companies". https://www.informdirect.co.uk/shares/what-are-treasury-shares/#:~:text=....
So actually I think I'm back to square one - assuming my client can do this small capital payment AND keep the shares in treasury, then where does the debit go please?
Ah... I see a lightbulb coming on. I think you're saying this would be a cancellation of the shares - and then the dr entry would indeed be to share capital to reduce the overall value. As shares bought back using capital cannot be held in treasury and must be cancelled. Got it now (I think!), thank you.
Thanks Ruddles... sorry my bad, I meant 5%/£15k.
If a company can make a purchase of out capital, then isn't that the same as holding its own shares - i.e. treasury shares? It sounds like the same thing to me. Apologies, I'm still not getting the concept or how to recognise in the books.
Thanks very much. That prompted me to check the treaty for one of the countries we are considering and the criteria for residency are:
1) Where a permanent home is available
2) If a permanent home is available in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests).
3) Habitual abode
4) State of which he is a National
And additionally, if a person other than an individual (i.e. my company) is a resident of both Contracting States, "it shall be deemed to be a resident of the State in which its place of effective management is situated" which is what I was expecting it to say.
At the moment, our first move overseas will likely be 6 months - 2 years. Then to a different country after that for 2-3 years at a time. So it's all very messy for me to keep changing my personal/corporate residency each time if I don't have to.
My firm is small and I only work c. 1000 hrs per year, and half of this is for 2 clients who I could go on the payroll for. I'm starting to think that if I can squeeze the majority of the remaining 500 hours or so for my other small clients into my c. 50 UK days and ensure I meet all clients/do my accounts in the UK then I can 'effectively manage' the company from the UK. Do you think this would work?
I was just wanting to maintain the status quo really as I think we'll be moving quite a bit over the next few years. And as per one of other comments, the taxpayer would generally not have dual residency so I would prefer to stick with the UK if I can engineer it.
I don't trigger the 3rd auto overseas test as my practice is quite small and I don't work enough hours but one to consider for the future thanks if I get big enough.
I was just wanting to maintain the status quo really as I think we'll be moving quite a bit over the next few years. And as per one of other comments, the taxpayer would generally not have dual residency so I would prefer to stick with the UK if I can engineer it.
I don't trigger the 3rd auto overseas test as my practice is quite small and I don't work enough hours but one to consider for the future thanks if I get big enough.
I was referring to the 2nd automatic UK test which was worded a bit differently in another flow chart as "you have a home in the UK where you were present for more than 30 days"..... but I'd forgotten one of the requirements for this one was to NOT have an overseas home as well. But I'll have enough UK ties/UK days to stay UK resident anyway.
Thanks Jon. All food for thought and some helpful tips/extra points. I actually want to remain a UK resident for personal tax purposes, and I reckon I will achieve that because I have a holiday home in the UK where I spend more than 30 days anyway so I would be automatically resident per the SRT. I'll get to grips with the local laws once I know where we are moving to.
Proving UK "residency" for banking purposes is the tricky bit I fear. I think the options are:
1) Change my business address to my UK holiday let to keep my current bank happy, but then the mail wouldn't get forwarded and I would only pick it up periodically.
2) Change my business address to a mail house to forward my mail electronically and change to a challenger bank if and when my current bank Barclays can't cope with this.
3) Change my business address to overseas to save paying a mailhouse/ditto re. the bank. HMRC is pretty much the only entity that sends me snail mail. Their response times are so bad, another few days/weeks wouldn't make much of a difference! Presumably HMRC would send post to an agent with an address in Europe/RoW but I would worry about the brown envelopes not having the right postage on and the letters not reaching me at all. I can't even call the Agent Maintainer Team to check the process here as they don't have a phone number!
Thanks - very helpful link. I did try searching AWEB to see if anyone had asked a similar query but it didn't return any results. Think I used the word 'firm' not 'practice'....