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HMRC internal manual

Corporate Intangibles Research and Development Manual

HM Revenue & Customs
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Intangible assets: groups: degrouping: exclusion of exempt distributions



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. There are special tax rules for demergers that fall within the scope of ICTA88/S213 (see CTM17200 onwards).

Exception from degrouping

Paragraph 61 disapplies the degrouping adjustment in FA02/SCH29/PARA58 and PARA60, where a company ceases to be a member of a group by reason only of an exempt distribution within ICTA88/S213 (2).

Reinstatement of degrouping adjustment

If within five years of making the exempt distribution there is a ‘chargeable payment’ then paragraphs 58 and 60 do have effect. Because of the uncertainty as to whether returns will have become final, enquiries can still be opened etc. Paragraph 61(2) permits all such necessary adjustments by way of assessment, amendment of returns, or otherwise to be made to reinstate the effects of paragraphs 58 or 60.

For the meaning of ‘chargeable payment’ in this context see CTM17290.