Commentary

I5.1024 Distributions received by trustees on a demerger—CGT

IHT, trusts and estates

I5.1024 Distributions received by trustees on a demerger—CGT

I5.1024 Distributions received by trustees on a demerger—CGT

CGT treatment on demergers—overview

A demerger takes place when a company (A) transfers either part of its trading activities or shares in a 75% subsidiary (S) to a separate company (B) not belonging to the same group as A1.

It may be either:

  1.  

    (a)     a direct demerger, where A distributes to its members shares in B, or

  2.  

    (b)     an indirect demerger, where the trading activities or the shares in S are transferred to B in exchange for the issue by B of its own shares to the members of A2

Where the demerger takes place on or after 1 October 2013, the receipt of B shares on a tax exempt distribution, whether in a direct or indirect demerger, is treated as a receipt of capital3 for trustees of any trust (see I5.1006).

CGT treatment of demergers from 1

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