A demerger is a form of corporate restructuring in which the entity’s business operations are segregated into one or more components. (Wikipedia)
Demergers are not defined in Tax Law but can be successfully used by Trading Companies and do get special tax treatment.
CTA10/S1075 & TCGA92/S192
A demerger is a series of transactions which have the effect and purpose of dividing the trading activities carried on by a single company or group of companies between two or more companies or groups of companies. CTA10/S1075 and TCGA92/S192 provide special tax treatment if certain conditions are met. Companies may seek advance clearance under CTA10/S1091 that proposed transactions will be an exempt demerger. CTM17200 onwards gives further guidance on the action to be taken by local offices in dealing with demergers.
Basically there are 3 ways to do Demergers
- Distribution in specie – CTM17250
- Liquidation
- Reduction in Capital
Property Investment Companies are not trading companies so demergers are extremely complicated as explained in this article in Taxation
steve@bicknells.net
Business Accountant 