Section 1033 — Corporation Tax Act 2010: Purchase by unquoted trading company of own shares

Purchase by unquoted trading company of own shares 1033 1 A payment made by a company on the redemption, repayment or purchase of its own shares is not a distribution for the purposes of the Corporation Tax Acts if—

a the company is an unquoted trading company, or the unquoted holding company of a trading group, and b either Condition A or Condition B is met.

2 Condition A is that—

a the redemption, repayment or purchase is made wholly or mainly for the purpose of benefiting a trade carried on by the company or any of its 75% subsidiaries, b the redemption, repayment or purchase does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is—

i to enable the owner of the shares to participate in the profits of the company without receiving a dividend, or ii the avoidance of tax, and c the requirements set out in sections 1034 to 1043 (so far as applicable) are met.

3 Condition B is that the whole or substantially the whole of the payment (apart from any sum applied in paying capital gains tax charged on the redemption, repayment or purchase)—

a is applied by the person to whom it is made in discharging a liability of that person for inheritance tax charged on a death, and b is applied in that way within two years after the death.

4 But if condition B is met, subsection (1) does not apply so far as the liability in question could without undue hardship have been discharged otherwise than through the redemption, repayment or purchase of—

a shares in the company, or b shares in another unquoted company which is a trading company or the holding company of a trading group.

5 In sections 1034 to 1043— “ the purchase ” means the redemption, repayment or purchase referred to in subsection (1), and “ the seller ” means the owner of the shares at the time the redemption, repayment or purchase is made.

6 In this section and sections 1034 to 1047 references to a payment made by a company include anything else that—

a is a distribution, or b would be a distribution but for this section.