Introduction Overview Chapter 2: Matters which are distributions Section 1025: Share capital issued at a premium representing new consideration
3029.This section provides further interpretation of what constitutes a repayment of share capital. It is based on section 211(5) and (6) of ICTA.
3030.If a premium is paid by the purchaser on the issue of share capital, the amount of the premium is considered to be part of the value of that share capital for the purpose of determining what is subsequently to be treated as a repayment of share capital or as a distribution.
3031.For example, taking sections 1024 and 1025 together, if share capital with a nominal value of £100 is issued at par and is later repaid with a redemption premium of £20 then only £100 is considered to be a repayment of share capital.
3032.If, however, that same share capital was issued at an issue premium of £10, then £110 of the £120 would be regarded as a repayment of that share capital. However, all or part of the £10 issue premium is not regarded as a repayment of share capital to the extent that it has already been applied in paying up any share capital – see subsection (3).