Company buying back its own shares and stamp duty

[uknick]

I've a client who are in their first year of trading as a private Ltd company.

They've now realised they made a mistake with regard to the way they set up the share capital. Therefore, they wish to buy back all the shares originally issued and then re-issue new ones.

The value of the shares to buy back exceeds £1,000 so SDLT is a possibility.

Does anybody know if there is an exemption from SDLT in this situation? I've spoken to the HMRC helpline and they are not aware of any and advised me to Google it!!

[anonymous-user]

Yes if over £1k

There is a specific form SH03 return of purchase of own shares

Available to download from companies house

[uknick]

JPJPJP said:

Yes if over £1k

There is a specific form SH03 return of purchase of own shares

Available to download from companies house

Thanks for that, but I'm looking to see if there is any relief they can claim and if so under what Act.

I've since read about S77 reconstruction relief, but this doesn't seem to cover the exact same situation.

[Alpinestars]

Why can't you do a return of capital and reissue of new shares?

[Thurbs]

Also, if there is CGT liabilities, make sure they have an agreed valuation with HMRC. We issued some shares + options and spent quite a long time getting this right to minimise the taxable gain.

[Alpinestars]

Shouldn't be too much of a gain, if any, by the looks of it. In its first year of trading.

[plasticpig]

Thurbs said:

Also, if there is CGT liabilities, make sure they have an agreed valuation with HMRC. We issued some shares + options and spent quite a long time getting this right to minimise the taxable gain.

The rules are very very complex. Did a share buy back a few years ago. It was a close company. On their tax returns the directors had to declare the money paid for the shares as dividend income and not a capital transaction.

[Alpinestars]

plasticpig said:

The rules are very very complex. Did a share buy back a few years ago. It was a close company. On their tax returns the directors had to declare the money paid for the shares as dividend income and not a capital transaction.

It can be capital or income depending on the facts.