½Û×ÓÊÓƵ

Demerger via a liquidation ― overview

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance

Demerger via a liquidation ― overview

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance
imgtext

A liquidation demerger is a non-statutory method to carry out a demerger.

The stringent conditions for a statutory demerger and the chargeable payments rule can often make that demerger route unfeasible or undesirable. See the Statutory demergers - overview guidance note for details of these.

As a result, in certain circumstances, the statutory demerger route may not be available (or suitable). For example:

  1. •

    the company does not have sufficient distributable reserves

  2. •

    there are plans to sell the demerged business or businesses

  3. •

    the business that is being demerged is not a trading business

In such cases, there are two alternative non-statutory procedures for carrying out the demerger. One is set out in Insolvency Act 1986, s 110, and is often referred to as a section 110 demerger or liquidation demerger. The second is through a reduction in the company’s share capital, known as a demerger by way of a Companies Act reconstruction or a ‘capital reduction demerger’. This guidance note provides an introduction to liquidation demergers. For capital reduction demergers, see

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+â„¢
Powered by

Popular Articles

Enterprise investment scheme tax relief

Enterprise investment scheme tax reliefOverview of EIS tax reliefsThe enterprise investment scheme (EIS) offers significant tax reliefs to encourage individuals to invest money in qualifying shares issued by qualifying unquoted companies. The scheme is designed to encourage investment in small,

14 Jul 2020 11:36 | Produced by Tolley Read more Read more

Associated companies ― from 1 April 2023

Associated companies ― from 1 April 2023Implications of associated companiesFrom 1 April 2023, the rate of corporation tax that a company is subject to depends on the level of its augmented profits. The rate of tax is based on a comparison of the company’s augmented profits against the corporation

22 Mar 2021 10:21 | Produced by Tolley Read more Read more

Class 1 v Class 1A

Class 1 v Class 1AClass 1 and Class 1AClass 1 and Class 1A are the categories of NIC that can be charged on expenses reimbursed and benefits provided to employees. These classes are mutually exclusive. A benefit cannot be subject to both Class 1 and Class 1A NIC. Three requirements must be met

Read more Read more