Corporation Tax Act 2010 section 1039

Requirements where purchasing company is a member of a group

Section 1039 sets out the additional requirements that must be met for a purchase of own shares to be treated as not being a distribution, where the company making the purchase is a member of a group.

• Where the purchasing company is part of a group, the seller's shareholding interest across the whole group must be substantially reduced as a result of the purchase.
• If the seller retains shares in other group members after the purchase, or held shares in other group members before the purchase and retains shares in the purchasing company, the substantial reduction test applies at group level.
• If an associate of the seller holds shares in any group member immediately before the purchase, the combined interests of the seller and the seller's associates must also be substantially reduced.
• These requirements may be relaxed in certain cases under section 1043.