This would especially be the case where the remaining shareholders do not have the resources (without personally borrowing the funds) to acquire the shares from the exiting shareholders (vendors) and the remaining shareholders want to ensure that the shares are not sold to other shareholders who may not be acceptable.  The vendors may also benefit from the Capital Gains Tax (CGT) treatment of the shares.

When a company purchases its own shares then the normal tax treatment is for the purchase price to be treated as a distribution – taxable income of the recipient/vendor. The amount subject to income tax is the excess of consideration over the amount subscribed for the shares. The excess is treated as a distribution and taxed as a dividend. This treatment would be more suitable for a basic rate tax payer.

There are exceptions to this treatment which may be advantageous to vendors who would benefit from CGT treatment on the disposal of shares. Capital treatment on the disposal of shares can be obtained for the vendor where an unquoted company purchases its own shares and one of the following conditions are met:

1. Condition A - The purchase of own shares is made wholly or mainly for the purposes of benefiting a trade carried on by it or by its 75% subsidiary and does not form part of an arrangement where the main purpose of the transaction is designed to benefit the vendor. There are other conditions for the vendor*.
2. Condition B – The whole or substantially the whole of the payment is applied by the person to whom it is made in discharging a liability of that person for inheritance tax charged on a death and is applied that way within two years after the death.

*Other conditions (for vendor) that need to be met in respect of Condition A include:

1. Vendor must be resident in UK.
2. Vendor must not be connected to the company after the sale – employee considered connected for this purpose if he possesses more than 30% of the ordinary share capital, loan capital or voting power of company.
3. The shares owned by the vendor must have been held for a minimum period –a five year period ending with disposal.

Examples of trade benefit test can be found at HMRC SP2/82 HMRC.

HMRC operates a statutory clearance procedure to help clarify the position for companies purchasing their own shares.

There were amendments to the regulations for the Purchase of own shares by an unquoted company which came into force on 30 April 2013. These regulations will not themselves give rise to an employment income tax charge for employees holding shares but certain events facilitated by the regulations may trigger a charge – see HMRC - purchase of own shares - lifting of a restriction on shares, shares not sold at market value, share options and close companies.

There are certain procedures that need to be followed by the company for purchasing own shares the most straight forward of which is from distributable reserves. In the scenario described above there does need to be sufficient profits to make the purchase of shares from reserves.

The shares being purchased must be fully paid up and the shares must be paid for on purchase. There must be some issued shares left in existence after the purchase.

The purchase must be approved by a special resolution which must be filed within 15 days of its passing. The procedures for passing a special resolution must be followed and a copy of the contract or memorandum setting out the terms of special resolution must be made available to the company members.

The person whose shares are being purchased cannot vote on the resolution.

Companies House return form SH03 should be completed and if stamp duty payable on purchase of own shares (if consideration greater than £1,000) then form must be submitted to HMRC for stamping before forwarding to Companies House (within 28 days).

Before making a decision for the company to purchase own shares then it is advisable that further advice is taken as the company situation may not be straight forward and you may be caught by some of the pitfalls in this area.

Please contact us for further advice.

The eReminder service, once you’ve opted into it, enables the receipt of e-mail reminders confirming the date of filing of a company’s accounts and annual return. The accounts reminder is sent at least one month before the filing deadline and the annual return reminder are sent on or after the company’s made up date and before the due date. These replace the previous paper reminders.

 To join eReminders simply:

• Log into WebFiling.
• Select 'Join eReminders' from the company overview screen.
• Enter your e-mail address.
• Add up to 3 more e-mail addresses (It is recommended that Edwin Smith clients include their Edwin Smith contact’s e-mail as one of the additional 3 email addresses).
• You will receive emails to that your company is in the eReminder service.

To join the eReminder service you must first be registered for WebFiling which you should be unless you file a paper annual return form, if you are not currently registered and follow link File information on a company

As an Edwin Smith client it would be helpful to receive these email reminders especially where we are not the registered office to avoid any forms being submitted late.

 Please contact us  if you require any assistance.

As an example where organisations process personal information for the following purposes then registration will need to be made to ICO:

• Accountancy and auditing
• Legal services
• Education
• Provision of financial services and advice
• Consultancy and advisory services
• Health administration and provision of patient care
• See guide detailed below for further examples

There are possible exemptions for notifying ICO (that include not-for-profit organisations) but data controllers must comply with the provisions of the 1998 Act even if they are exempt from the Act .

There are a number of data protection principles that cover the regulations for personal information. These principles include the security, accuracy and length of time information is kept.

For smaller organisations the registration fee is £35. For organisations with turnover of £25.9M and 250 or more members of staff the fee is £500.

There is an online Self assessment guide - notification which will help you comply with the Data Protection Act. The guide will lead you through a series of questions to confirm if you should register and provides a checklist to assist you take the necessary precautions with personal information. The registration can be completed online New Registration - Data Protection Act - ICO. 

Please contact us for if you have any questions.

2 November: Submission of form P46 (car) for changes in quarter to 5 October 2012

5 November: End of month 7 for PAYE

7 November: Online VAT return due to be filed and electronic payment of VAT due to be cleared into HMRC bank: quarter ended 30 September 2012

12 November: Direct debit VAT payment will be taken: quarter ended 30 September 2012

19 November: CIS monthly return deadline: month ended 5 November 2012

19 November: Cheque payments due for PAYE/NI, student loan and CIS: month ended 5 November 2012

22 November: Electronic PAYE/NI etc payments to be cleared into HMRC bank: month ended 5 November 2012

30 November: Company tax return CT600 due to HMRC: years ending 30 November 2011

30 November: Company accounts (Private Limited Co) due to be filed: years ending 29 February 2012

30 November: Company accounts (Public Companies) due to be filed: years ending 31 May 2012

1 December: Corporation tax payment for company not within the instalment regulations: years ending 29 February 2012

1 October: National Minimum Wage increase comes into effect

2 October: HMRC Tax return initiative deadline

5 October: Notify HMRC of chargeability to Income Tax / Capital Gains Tax from this date if not within Self Assessment for 2011/12

5 October: End of month 6 for PAYE

7 October: Online VAT return due to be filed and electronic payment of VAT due to be cleared into HMRC bank: quarter ended 31 August 2012

12 October: Direct debit VAT payment will be taken: quarter ended 31 August 2012

14 October: CT61 quarterly return and payment deadline:  quarter to 30 September 2012

19 October: CIS monthly return deadline: month ended 5 October 2012

19 October: Quarterly nil payment notification: quarter to 5 October 2012

19 October: Cheque payments due for PAYE/NI, student loan, CIS and PAYE Settlement Agreements: month ended 5 October 2012

22 October: Electronic PAYE/NI etc payments (inc PAYE Settlement Agreements) to be cleared into HMRC bank: month ended 5 October 2012

31 October: Deadline for submission of paper self assessment returns for 2011/12

31 October: Company tax return CT600 due to HMRC: years ending 31 October 2011

31 October: Company accounts (Private Limited Co) due to be filed: years ending 31 January 2012

31 October: Company accounts (Public Companies) due to be filed: years ending 30 April 2012

1 November: Corporation tax payment for company not within the instalment regulations: years ending 31 January 2012

2 November: Submission of form P46 (car) for changes in quarter to 5 October 2012

5 September: End of month 5 for PAYE

7 September: Online VAT return due to be filed and electronic payment of VAT due to be cleared into HMRC bank: quarter ended 31 July 2012

12 September: Direct debit VAT payment will be taken: quarter ended 31 July 2012

14 September: HMRC E-marketplaces campaign, time to disclose and pay

19 September: CIS monthly return deadline: month ended 5 September 2012

19 September: Cheque payments due for PAYE/NI, student loan, CIS: month ended 5 September 2012

22 September: Electronic PAYE/NI etc payments to be cleared into HMRC bank: month ended 5 September 2012

30 September: Company tax return CT600 due to HMRC: year ended 30 September 2011

30 September: Company accounts (Private Limited Company) due to be filed: year ended 31 December 2011

30 September: Company accounts (Public Company) due to be filed: year ended 31 March 2012

1 October: Corporation tax payment for company: year ended 31 December 2011

1 October: National minimum wage increases from this date

2 October: HMRC tax return initiative deadline

 If you require further information, please contact us.