Share buy back

[Lance]

Ok. This a wheeze. Probably never going to fly but I'm interested as to why not.


Rather than take dividends from my Co. how about the company buys back shares? This would be capital so attract CGT, with a £10k allowance and 20% tax. Obviously no use if staying under the c. £50k threshold, but if paying a lot can it work?
It wouldn't be a liquidation so trade can continue.

I assume BADR wouldn't be claimable so leave that to one side.
To be any use long term more shares would need to be issued at some stage but at the very worst that could only attract tax based on the capital value and the figure at that point would be subtracted from the buy back figure as CGT is paid on the gain only.

What have I missed?
I guess GAAR might be an issue.

[Lance]

Google tells me why it won't work


Company share buyback - Gannons Solicitors

HMRC conditions for capital taxation of the profit made by a shareholder

• The shareholder must have held the trading company’s shares for five years;
• The departing shareholder’s holding must substantially reduce;
• There must be a solid business case; and
• The buy back cannot be a part of a tax avoidance plan.

[jamesbrown]

The whole point of the Transactions in Securities legislation for close companies is to avoid such shenanigans by preventing a taxpayer from gaining a tax advantage through a capital distribution. So, no, you can be almost certain that it won't work. However, if a close company wants to buy back shares for one of the (several) shareholders to **retire** from the business, that would probably work.