Readers’ forum: Family demerger

Our client is a trading company operating from two separate retail outlets. Mum and dad who are both in their 70s have decided they can no longer run the company and wish to hand it over to son and daughter who already work in the business. The departure of mum and dad would be the subject of a buy-back and we are comfortable that at this stage capital treatment would be available.

However the son and daughter have confessed to their parents that they cannot run the business together because of their clash of personalities and would prefer to each take a separate shop. This would mean a demerger after the buy-back.

Our question is whether the ‘for the benefit of the trade’ condition which is necessary for the buy-back to obtain capital treatment is satisfied if a demerger of...