The distributions legislation contains various terms and definitions which are explained further below. In the commentary below references to types of distributions are categorised according to the list at CTA 2010, s 1000(1), which categorises distributions into eight different paragraphs: paragraphs A–H (see D5.102).
Distributions—meaning of repayment of share capital
The general rule is that a repayment of capital on shares is not a distribution1 and this broadly allows a company to return to shareholders the amount of capital they contributed. HMRC's view is that a repayment of share capital includes a redemption and repurchase of shares2. Any premium paid on the redemption of share capital is not treated as part of the repayment 3, so if a company issues shares with a £1 nominal value which are subsequently repaid for £3 each, the premium of £2 would not be a repayment of share capital and would probably be a distribution under paragraph B.
Repayment of share capital and share premium
If the share capital was issued at a premium, the premium represents
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