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Readers’ forum: Will corporation tax be due on loan?

24 May 2024
Issue: 4938 / Categories: Forum & Feedback , Business
Purchase of own shares

A company is undertaking a purchase of own shares using the ‘single contract multiple completion’ method.

The shares are being bought back in two tranches with half the shareholding being bought back on ‘day one’ and the remaining half expected to be bought back within two years subject to available cash and reserves at that time.

In accordance with what we understand the process to be for that form of buy-back the tranche of shares to be bought back in the future have had their rights removed. The exiting shareholder also resigned as a director at that time.

What has puzzled us though is that once the ‘day one’ purchase of the initial tranche had completed with the consideration for that tranche paid and the rights removed from the remaining shares an interest-free loan was made to the exiting shareholder of approximately half...

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