Reporting for Company Share Buyback: HMRC & Compliance

(5 out of 5: Share Buyback Series)

This article is part of our Share Buyback Series, covering key aspects of company buybacks, tax implications, and reporting obligations.

Table of Contents

• Introduction

• Advance Clearance for Capital Treatment

  • An application for clearance must:

• Reporting requirements

• Key Considerations After a Company Share Buyback

  • 1. HMRC Reporting

  • 2. Stamp Taxes on Share Buybacks

  • 3. Companies House Filings

  • 4. Administrative Requirements

• Conclusion

Introduction

The Reporting for Company Share Buyback process ensures compliance with HMRC and Companies House regulations. If capital treatment applies, shareholders must report the buyback within 60 days of the transaction and can seek advance clearance from HMRC. This article outlines the steps for obtaining clearance, reporting obligations, and key considerations after a buyback.

🔗Related Read: Capital Gains on Share Buyback: Tax Rules & Requirements

Advance Clearance for Capital Treatment

In situations where capital treatment applies to the repurchase of a company’s own shares, it is possible to obtain advance clearance from HMRC.

External Resources:CTA 2010, s 1044

Regardless of whether advance clearance is sought, taxpayers seeking to treat amounts received from selling shares back to the company as capital must report details to HMRC within 60 days of the share buyback.

External Resources:CTA 2010, s 1046

An application for clearance must:

• be in writing

• include full details of the proposed share repurchase.

Usually the application should be submitted to HMRC’s Clearance and Counteraction Team. The clearance application can be submitted by post or email.

If HMRC refuses to give clearance, the taxpayer has no right of appeal.

Reporting requirements

Within 60 days of a company making a payment that it considers should have capital treatment applied, it must make a return to HMRC. The return must include details of the payment and the reason(s) why it is considered capital treatment should apply.

Companies must fulfill this reporting obligation whether or not they seek clearance. If they obtain clearance, they can submit a short letter attaching the clearance application and HMRC’s clearance letter.

There may be penalties for failure to meet these reporting obligations.

Key Considerations After a Company Share Buyback

1. HMRC Reporting

• Report the transaction to HMRC within 60 days, even if advance clearance was obtained.

• If clearance was granted, attach a short letter referencing the clearance application and HMRC approval.

2. Stamp Taxes on Share Buybacks

• Stamp Duty of 0.5% applies unless the purchase price is £1,000 or less.

• If Stamp Duty applies, form SH03 must be submitted to HMRC’s Stamp Office before filing with Companies House.

🔗 External Resource:HMRC Stamp Duty Guidance(Official HMRC link)

3. Companies House Filings

• Submit Form SH03 to notify Companies House of the buyback.

• If shares are immediately cancelled, submit Form SH06 as well.

• Both forms must be filed within 28 days of receiving the share certificates.

🔗 External Resource:Companies House Share Buyback Filings (UK Government Resource)

4. Administrative Requirements

• Update the company’s register of members.

• Cancel any share certificates related to the buyback.

• Keep a copy of the share buyback contract for 10 years.

• Disclose the transaction in the company’s financial accounts.

🔗 External Resource:Companies Act 2006, ss 694, 702(1), (2), (7)(UK Legal Resource)

Conclusion

That’s all when it comes to share buybacks. A lot of time, research and implementation goes into these articles and coupled with our experience puts us in a strong position to assist.

If you require expert tax guidance on share buybacks, get in touch with our team.

As always, if you have any specific queries, feel free to contact me.

Meet Omar Omar is a Chartered Tax Advisor (a.k.a an expert on tax issues) and founder of ASWATAX. He regularly shares his knowledge and best advice here in his blog and on other channels such as LinkedIn. Book a call today to learn more about what Omar and ASWATAX can do for you.

*Disclaimer: ASWATAX is a firm of Chartered Tax Advisors, and we strive to provide accurate, up-to-date tax insights. Tax laws may change, so this content is for general guidance only and not a substitute for professional advice. Seek independent tax and legal counsel before making decisions. ASWATAX is not liable for any loss from reliance on this information. Use at your own risk.