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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Demergers: direct demergers: CGT treatment: individuals

In the case of a direct demerger where individuals receive shares in a demerged company there is no immediate chargeable gain or allowable loss. The distribution is not treated for Capital Gains Tax purposes as a capital distribution. Instead the distributing company shares and the demerged company shares are treated as a single asset acquired when the distributing company shares were acquired. See TCGA92/S127 as applied by TCGA92/S192. If a shareholder then sells shares in either of the companies, the original cost of the shares in the distributing company is apportioned between the shares in the distributing company and the shares in the demerged company

  • in the case of a quoted company, by reference to the respective values on the first day on which the demerged shares were quoted, TCGA92/S130
  • in other cases, by reference to the respective values at the date of the disposal, TCGA92/S129.

See CG51890+.