Paul Davies, FCA, senior tax writer at Croner-i, considers the tax considerations when separating a company’s trading activities in a statutory demerger
This two-part article investigates how to achieve a tax efficient separation of a company’s trading activities by way of indirect demerger under the exempt distribution rules in Corporation Tax Act [CTA 2010], Pt. 23, Ch. 5.
Such demergers, alongside direct and indirect demergers of subsidiary companies, are commonly referred to as statutory demergers.
Under an indirect demerger, the trading activities which are going to be separated from the retained trading activities will be transferred by the original company to a standalone, newly-incorporated company [NewCo], in return for an issue of new ordinary shares by NewCo to the original shareholders of the original company.
