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Commentary

42.1 Overview

COMPANIES vol 11 acquisitions, mergers, demergers
| Commentary

42.1 Overview

| Commentary

42 Exemption for direct and indirect demergers

42.1 Overview

In certain circumstances, a distribution by a company of part of its trade or some of its trading subsidiaries is an exempt distribution and therefore not subject to the tax treatment set out above. The idea behind this relief is to enable distinct businesses currently conducted within one organisation to be separated, and managed and owned independently. As a result, it is possible to demerge businesses to different groups of shareholders rather than pro rata amongst all shareholders. The relief covers both1:

  1. 42.1.1

        ‘direct’ demergers, that is, the straightforward distribution by a

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