Produced by Tolley
  • 19 Oct 2021 22:55

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

  • Type 2 and 3 (indirect) statutory demergers ― tax implications
  • Type 2 ― indirect demerger ― trades transferred
  • Type 3 ― indirect demerger ― shares transferred
  • Reliefs for shareholders
  • Relief for distributing company
  • Degrouping charge exemption
  • Stamp Taxes
  • VAT
  • Tax issues for the transferred subsidiary company

Type 2 and 3 (indirect) statutory demergers ― tax implications

This guidance note deals with the tax consequences for shareholders and companies involved in either a ‘Type 2’ or ‘Type 3’ ‘Indirect’ Statutory demerger. For an introduction to Statutory demergers, including an overview and diagrams of the three permitted types of demerger, conditions for a statutory demerger, chargeable payments and clearances and reporting, see the Statutory demergers ― introduction guidance note.

For overall guidance on demergers, including choice of the most appropriate route and planning the demerger project, see the Demergers ― overview guidance note.

Statutory demergers are sometimes referred to as ‘Exempt demergers’.

Unlike direct demergers, an indirect statutory demerger can involve a distribution of assets (as opposed to, or as well as, shares) and still qualify as an exempt distribution.

Note prior to the demerger, it may be necessary, or desirable, to carry out a hive-down (ie where there is an intra-group transfer of assets to the demerged company).

Type 2 ― indirect demerger ― trades transferred

A ‘Type 2’ indirect demerger involves the transfer by all or some of the shareholders of the 75% trading subsidiaries’ trades instead of the shares to the new companies set up by shareholders. Consideration is in the form of shares in the new companies.

This may be illustrated as follows:

Type

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