Clearance clarification

17 March 2009

Issue: 4198 / Categories: Forum & Feedback , Capital Gains , Companies

HMRC have given a clearance for the reconstruction of a holding company and its two subsidiaries into two separate companies. The clearance states that it does not extend to a sale or liquidation of the new companies. What are the implications?

We recently advised on a relatively straightforward reorganisation of a client company using Insolvency Act 1986 s 110.

An existing holding company (HoldCo) was placed into members’ voluntary liquidation with a trading subsidiary being transferred to NewCo 1 and an existing portfolio of three properties operated as an investment business being transferred to NewCo 2.

Both companies have the same shareholders holding the same proportions of share capital as in HoldCo.

The main reason for the reorganisation was to isolate the commercial risk of the trading company from the property portfolio; and an ancillary reason was to remove the tainting (or possible exclusion) of business property relief on the value of the trading subsidiary.

There is no short-term – or even medium-term – intention to sell either NewCo although if an offer at the right price were made not surprisingly it is likely...

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