Statutory demergers—chargeable payments, clearance in advance and returns
Statutory demergers—chargeable payments, clearance in advance and returns

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

  • Statutory demergers—chargeable payments, clearance in advance and returns
  • Chargeable payments
  • Chargeable payments—general definition
  • Condition A
  • Condition B
  • Condition C
  • Condition D
  • Chargeable payments—definition for unquoted companies
  • Condition B1
  • Condition C1
  • More...

Statutory demergers—chargeable payments, clearance in advance and returns

This Practice Note is about the following aspects of the tax rules on statutory (ie dividend) demergers:

  1. the anti-avoidance rules concerning chargeable payments, and

  2. the clearance and notification procedures

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.

For information on:

  1. what a statutory demerger is

  2. the difference between the direct and indirect routes

  3. the circumstances in which a company might choose to carry out a statutory demerger

  4. the steps involved

  5. the tax implications, and

  6. why it is important for a statutory demerger to qualify as an exempt distribution

see Practice Note: Statutory demergers.

For a precedent clearance application letter for a statutory demerger, see Precedent: Clearance letter—statutory demerger.

Chargeable payments

The distribution that is made under a statutory demerger should be treated as exempt (ie be an exempt distribution) and so should not trigger any charge to income tax or corporation tax on income in the hands of the shareholders.

The tax relief afforded by treating distributions made under a demerger as exempt is subject to:

  1. anti-avoidance rules, one of which has the effect of denying exemption where a demerger is carried out with a main purpose of making a chargeable payment (see Practice Note: Statutory demergers—the

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