CG45620 - Demergers
In broad terms there is a demerger where trading activities carried on by a single company or group of companies are divided so as to be carried on by two or more independent companies or groups. This may take place through making a distribution of the assets of a holding company to that company’s shareholders. Where conditions are met then the distribution will not be taxable as an income or a capital distribution.
The tax rules for demergers are set out in CTA10/PART23/CHAPTER5 and the guidance is at CTM17250 onwards.
Where these rules result in an “exempt distribution” under CTA10/S1076 the TCGA92/S192 deals with the capital gains consequences, the main one being that the demerger is treated as a share reorganisation rather than a capital distribution. In addition, there will be no degrouping charge under TCGA92/S179, see CG45400+ where a company ceases to be a member of a group by reason only of an exempt distribution.