The money received by the shareholder for selling their shares back to the company can be treated as a dividend subject to income tax but, in certain circumstances, it can be treated as a capital payment with the gain being charged to Capital Gains Tax.In order for the buy-back proceeds to be treated as a capital payment in the hands of the former shareholder, the transaction must be seen as beneficial to the company's business, the shareholder must have held the shares for at least five years or three years where they were inherited, payment for the shares must be made in full and the shareholder's holding in the company must be substantially reduced or wiped out completely. It is possible to get advance clearance for the payment for the shares to be treated as a capital payment from HMRC by writing to them setting out the circumstances of the buy-back. You may find the notes here and here useful.I hope this helps but let me know if you have any further questions.
I know it would be preferential to take CGT up to your allowance in most cases.
In my case I don't have a huge salary so treating it as a dividend would be okay for me I think up to the top of the 20% band. I think I might fall into the bracket below. Italics But just wanted to check if in general shares sales back to a private company can be treated as Dividend. I think you are saying that 'Yes' in most cases it can be unless you want it to be CGT in which case you need to meet the criteria you have listed. Is that correct?
Any UK dividend income that comes to £34,370 (£32,010 in 2013-14) or less when added to non-savings income and savings income will be taxed at 10% (offset by a tax credit of 10% when you receive the dividend, meaning no further tax will be payable).