The proceeds of a company purchase of own shares from its sole shareholder shortly after his acquisition of the company’s entire share capital from its previous owners were an income distribution received by him. 

Background 

The appellant, an accountant, prepared accounts for a company (CAD). In June 2013, CAD’s shareholders approached the appellant to see if he would be interested in buying the company with a view to winding it up, as they believed there was no prospect of finding a buyer for CAD and did not want the burden and responsibilities of closing down the company. 

The parties eventually agreed on the structure of a deal, whereby the appellant bought the entire issued share capital (99 shares) of CAD for cash consideration of £1.95 million plus net asset value (ignoring the reserves representing £1.95 million); this was documented in a share purchase agreement. The company then