The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance note follows on from the Demerger via a liquidation - overview guidance note, which gives an introduction to demergers via liquidations (also known as non-statutory demergers, or section 110 demergers) and includes diagrams to illustrate a typical demerger via liquidation.
It should be possible for the original company to obtain relief from tax on the distribution of the business by virtue of the provisions for relief from tax on corporate gains on reconstructions in TCGA 1992, s 139.
Section 139 relief is available in respect of a 'scheme of reconstruction' which is defined in TCGA 1992, Sch 5AA. Usually a non-statutory demerger should meet this definition but this should be confirmed for each scenario. The main conditions for TCGA 1992, s 139 relief to apply to a scheme of reconstruction are:
Provided TCGA 1992, s 139 relief is available, the transfer is at no gain no loss. The transferee company receives the assets at cost (or March 1982 value) plus indexation allowance to the date of transfer.
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