Corporation Tax

Summary of main types of company reorganisation

Produced by Tolley
  • 27 Apr 2022 05:11

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Summary of main types of company reorganisation
  • Demergers
  • Reconstruction involving a transfer of a trade
  • Reduction in share capital
  • Purchase of own shares
  • Transfer of a trade
  • Further reading

Summary of main types of company reorganisation

This guidance note summarises some of the ways in which companies may reorganise their activities and some of the key tax considerations.


Groups may want to split out their activities for many different reasons. There may be conflicting interests between shareholders, legal reasons to separate a trade out from the rest of the group with corporate protection, or it may be the only way for a purchaser to be able to buy certain parts of the business.

The term ‘demerger’ covers several possible structures:

  1. statutory demerger

  2. demerger by way of reduction of share capital (often referred to as a capital reduction demerger)

  3. demerger by Insolvency Act 1986, s 110 demerger (also known as a liquidation demerger)

There are tax provisions which should enable certain tax advantages, mainly that for tax purposes a qualifying distribution is exempt and as such there is no income tax for the shareholder.

For more information see the following guidance notes:

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