Corporation Tax Act 2010 section 1024

Premiums paid on redemption of share capital

Section 1024 clarifies that premiums paid when a company redeems its share capital are not treated as repayments of share capital for the purposes of the distributions rules.

• When a company redeems its shares, any premium paid over and above the nominal value is not classified as a repayment of share capital.
• This distinction matters because repayments of share capital and distributions are treated differently for corporation tax purposes.
• The rule applies specifically within the distributions chapter of the Corporation Tax Act 2010, and works alongside section 1025 which provides further qualification.
• The practical effect is to ensure that the premium element of a share redemption falls to be considered under the distributions rules rather than being overlooked as a simple return of capital.