Taxes Consolidation Act 1997 section 181

Relaxation of conditions in certain cases

Section 181 provides relief where the strict conditions for capital gains tax treatment on a share buyback are not met by the seller, but can be met through the sale of shares by an associate of the seller.

• Where a seller does not satisfy the conditions in sections 178 to 180 (substantial reduction, connection test, etc.), relief may still be available if the purchase was proposed to help an associate meet those conditions.
• The associate must be able to satisfy the substantial reduction in shareholding test (section 178(2)) or the group shareholding test (section 179(6)) as a result of the seller's purchase.
• CGT treatment applies only to so much of the seller's purchase as is necessary to produce the result that the associate satisfies the relevant condition — any excess shares sold will be treated as a distribution.
• The seller must still satisfy the residence and minimum period of ownership requirements under section 177, even though the substantial reduction and connection tests are relaxed.