Taxes Consolidation Act 1997 section 184

Treasury shares

Section 184 sets out the tax treatment of treasury shares, providing that they are deemed cancelled on acquisition by the company, that no chargeable gain or allowable loss arises on cancellation, and that any reissue is treated as a new issue of shares.

• Treasury shares (shares bought back by a company from its shareholders) are deemed to be cancelled immediately upon acquisition by the company, even if they are not actually cancelled.
• No chargeable gain or allowable loss arises on the deemed or actual cancellation of shares, so the cancellation is entirely neutral for capital gains tax purposes.
• Where a company reissues treasury shares at a later date, the reissue is treated for tax purposes as an issue of new shares rather than a disposal of existing shares.
• Treasury shares are defined by reference to section 109 of the Companies Act 2014, which permits companies to hold their own reacquired shares for subsequent reissue or cancellation.