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HMRC internal manual

Capital Gains Manual

Demergers

TCGA92/S192 (3)

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.