Capital distributions: definition: demergers
A company can effect a demerger by distributing the shares in a 75 per cent subsidiary to its shareholders. If the conditions in ICTA88/S213 are satisfied this will not be treated as a distribution for Income Tax purposes. Such a distribution is not treated as a capital distribution either, TCGA92/S192. Instead it is treated as a share reorganisation within TCGA92/S126 - TCGA92/S130. For instructions on share reorganisations see CG51700+. For further instructions on demergers see CT1725+.