Corporation Tax Act 2010 section 1003

Redeemable share capital

Section 1003 explains how to calculate the amount treated as a distribution when a company issues redeemable share capital that is only partly paid for with new consideration.

• When redeemable shares are issued partly for new consideration, the portion properly attributable to that new consideration is not treated as a distribution under paragraph C of section 1000(1).
• The value of redeemable share capital for distribution purposes is the nominal value of the shares plus any premium payable on redemption, winding up, or in any other circumstances.
• The amount of the distribution is the difference between the total value of the share capital (including any redemption premium) and the new consideration given for the shares.
• This ensures that only the element of value received by the shareholder beyond what they paid is treated as a distribution for corporation tax purposes.