Corporation Tax Act 2010 section 1042

Other requirements

Section 1042 sets out additional conditions that must be satisfied for a company's purchase of its own shares to be treated as a capital transaction rather than a distribution, focusing on the seller's post-purchase connections and anti-avoidance safeguards.

• Immediately after the share buyback, the seller must not be connected with the purchasing company or any other company in the same group as the purchasing company.
• The purchase must not form part of any scheme or arrangement that is designed, or likely, to result in the seller or an associate of the seller holding disqualifying interests in the company.
• Any transaction taking place within one year after the purchase is automatically treated as part of a scheme or arrangement that includes the purchase itself.
• These requirements relating to the seller's connection and anti-avoidance are subject to relaxation in certain cases under section 1043.