CTM17550 | Distributions: purchase of own shares: repeat bonus issues
From HM Revenue & Customs · Company Taxation Manual
, S1026 and S1033
If a company makes a bonus issue followed by a purchase of own shares, and then another bonus issue, is considered to apply before . This has the following consequences.
The first bonus issue operates as the first leg of . If a repayment of share capital followed it, that repayment would be treated as a distribution.
If the purchase of own shares satisfies the conditions of it will not give rise to a distribution. The amount that exempts from distribution treatment includes the amount that would otherwise be a distribution by virtue of because of the earlier bonus issue.
If the company subsequently makes a further bonus issue, this would be a distribution under if it were not for the previous operation of . This is because it would be a bonus issue following a repayment of share capital. But does not operate on the subsequent bonus issue. This is because a payment that is prevented from being a repayment of share capital for the purposes of B (because of the operation of ) is also not treated as a repayment of share capital for the purposes of .