Technology &
Internet Law

The Tax and Accounting Impact of Capital Reductions

What you need to know

In a “vanilla” share capital reduction scheme the entries are generally purely Balance Sheet entries, and there should in normal circumstances be no tax impact relating to the reduction of Capital.

Regarding the accounting entries, these would normally be to debit the relevant capital account and credit the profit and loss account to release these funds to make them available for debt reduction / distribution. Where you have different classes of shares however the position is significantly more complex.

You should seek advice before taking any steps to reduce capital.

Please also see:

• The rules on maintenance of share capital
• The importance of creditors consent in capital reduction schemes
• Legal Requirements for reduction of the share capital accounts of UK companies

NEED TO KNOW MORE?

For further information on the reduction of share capital and company law contact Julian Danobeitia. Should you prefer to telephone, call us on +44 (0)20 7278 1817

Kaltons Solicitors, Suite 302, Spitfire Studios, 63-71 Collier Street, London, N1 9BE. Telephone +44 (0)20 7278 1817

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