Corporation Tax Act 2010 section 1027A

Distributions following reduction of share capital

Section 1027A sets out how distributions made from reserves created by a reduction of share capital are treated for corporation tax purposes, ensuring they are not regarded as repayments of share capital.

• A distribution made from a reserve arising from a share capital reduction is treated as if it were made from distributable profits, not from the capital reduction itself
• Share capital includes any share premium representing new consideration, so the premium amount is also caught by this rule
• For companies incorporated outside the UK, the provision applies where the share capital reduction was carried out under equivalent foreign laws corresponding to the relevant UK companies legislation
• This section applies only for corporation tax purposes and does not apply to any provision relating to income tax