Taxes Consolidation Act 1997 section 174

Taxation of dealer's receipts on purchase of shares by issuing company or by its subsidiary

Section 174 sets out the tax treatment where a company buys back its own shares (or its parent company's shares) from a share dealer, ensuring the proceeds are taxed as trading income rather than as a distribution.

• When a company purchases its own shares from a dealer, the price is treated as a trading receipt taxable under Case I or II of Schedule D, not as a distribution under Schedule F.
• A "dealer" is any person whose profits from selling shares would normally be taxed as trading or professional income under Case I or II of Schedule D.
• The term "purchase" extends to redemption, repayment of shares, and the purchase of rights to acquire shares.
• An exception applies for fixed-rate preference shares held continuously by the dealer since issue — these are subject to normal distribution treatment on redemption, preserving favourable tax treatment for corporate venture capital providers.