Reflections on demergers

Key points

• Demergers are fun – each case with its own set of facts and problems to be solved.
• The basic proposition of a demerger is to split the activities of the company or group with the minimal of tax cost. The one sticking cost can be stamp duty or stamp duty land tax. Corporation tax capital gains tax and income tax should be covered by the relieving provisions.
• CA 2006 brought the ‘capital reduction demerger’ to join its more popular friend the s 110 demerger.
• The statutory demerger is appropriate for separating trades and the capital reduction demerger for separating trades and non-trading businesses.
• Demergers usually take between two and six months to complete.

Demergers are great fun. Honestly they are. Every case has its own facts and circumstances and problems to be solved. People just don’t appreciate the fun we have in the tax profession. This...