Corporation Tax Act 2010 section 1025

Share capital issued at a premium representing new consideration

Section 1025 explains how share premiums paid on the issue of new shares are treated when determining whether a later payment to shareholders counts as a repayment of share capital or as a distribution.

• When shares are issued at a premium for new consideration, the premium amount is treated as part of the share capital for the purpose of assessing whether a later distribution is a repayment of share capital.
• This treatment increases the amount that can be repaid to shareholders without being classified as a distribution for corporation tax purposes.
• However, any part of the premium that has already been used to pay up other share capital loses this treatment and can no longer count towards the repayment threshold.
• The section works alongside section 1024, which deals with redemption premiums, to distinguish genuine capital repayments from taxable distributions.