Liquidation demergers
Liquidation demergers

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Liquidation demergers
  • When is a liquidation demerger appropriate?
  • Which tax clearances are needed?
  • Steps in a liquidation demerger
  • Step one—insert a new holding company
  • Step two—transfer one business to the new holding company
  • Step three—liquidation of the new holding company
  • Partition demergers

FORTHCOMING CHANGE on amendments to FA 1986, s 77A: Finance Bill 2019–20 amends, with effect from Royal Assent, section 77A of Finance Act 1986 (FA 1986) to ensure that stamp duty relief under FA 1986, s 77 can still apply if the person who obtains control of the acquiring company has held at least 25% of the issued share capital of the target company at all times during the period of three years immediately before the time when shares are issued by the acquiring company as consideration for the acquisition of target. The aim is for this change to prevent a stamp duty double charge from arising in respect of partition demergers (see paras 30 and 35 of the summary of responses to the consultation on aligning the stamp duty and SDRT consideration rules). For more information, see News Analysis: Draft Finance Bill 2019–20—Tax analysis—Stamp taxes on securities—amendments to FA 1986, s 77A.

This Practice Note is about the tax implications of liquidation demergers, also known as section 110 demergers, after section 110 of the Insolvency Act 1986.

For background on why a company might carry out a demerger, and an introduction to the other ways in which a demerger may be structured, see Practice Note: Demergers—an introduction to the tax issues.

More detailed Practice Notes describe the tax issues associated with the