An Index to Reorganisations, Demergers & Share transactions

: Last Updated: 26 April 2022

What is a company reorganisation or reconstruction? What tax reliefs apply to a company reorganisation, a share for share exchange, reconstruction or other transaction involving shares?

You can reorganise or separate company activities and different subsidiaries using a variety of different methods.

The super-practical tax guides in this index provide an outline of the tax treatment together with step guides and tax clearance templates.

Instructions

1. Using the 'Transactions Planner, decide what you want to do and what Option works best.

2. Follow the links to the Tools to find the tools for the job.

3. Check out our Case studies to find your topic.

Transactions Planner

Reorganisation Planner

What do you want to do?

Aim	Options	Tools

Creating a group Inserting a new holding company Creating new subsidiaries Why? To separate new or different activities To create a holding company for a share scheme or investment relief Asset protection	Add a new subsidiary: Incorporation of a new subsidiary by an existing company Form a group Insert a new holding company via share for share exchange	Guides How to start a new company Share for share exchanges Case study & tax clearance template Creating a group Paperwork Forming a group: documents

Reorganise share capital: To create different share classes To change share rights	With shareholder approval: amend by Companies Act 2006 resolution: Bonus & rights issues Sub-division Alteration of rights	Guides Reorganisations & Conversions ABC or Alphabet shares: Family companies ABC of alphabet shares: directors & employees CGT Value shifting

Repay share capital: Return share capital to shareholders, or Create a credit to the profit and loss reserve	Capital reduction	Guides Capital Reduction index Capital Reduction: distribute capital Capital Reduction: tax treatment

Prepare for immediate sale: Move saleable activity to a new clean company Separate the activities of a company into two companies Why? The potential sale of one trade. Separation/fallout of business partners.	Share sale following: Liquidation demerger Capital reduction demerger Asset sale Move up or across or down: transfer of business/assets around a group	Guides Reconstructions: transfer of a business Demergers: what are your options? Substantial Shareholding Exemption (SSE) Case studies & tax clearance templates Case Study 2: Tradeco: Demerger of its investment business Case Study 3: Tradeco demerger of investment subsidiary Case Study 4: Investco: Demerger of trading subsidiary

Tidy up the business or assets or plan for a potential future sale Split activities to separate out two trades Tidy up or plan for a potential future sale: Demerge a trading subsidiary Demerge an investment subsidiary Streamline a group Why? Potential sale of trade or investment business or investment asset To preserve Capital Gains Tax (CGT) Business Asset Disposal Relief (BADR) or Inheritance Tax (IHT) Business Property Relief (BPR).	Just trades: Statutory demerger Capital reduction demerger Liquidation demerger Trades or business: Liquidation demerger Capital reduction demerger	Guides: Demergers: what are your options? Reconstructions Case studies: just trades Case Study 1: Tradeco: demerger of two trades Case studies: a mixed business Case Study 2: Tradeco, demerger of its investment business Case Study 3: Tradeco demerger of investment subsidiary Case Study 4: Investco: Demerger of trading subsidiary

Tidy up the business or assets or plan for a potential future sale Alternatives to a demerger	Distribution: de-envelope assets by transfer to shareholders Asset sale to a new company or shareholder	Guides De-enveloping a property

Buyout By management By a third party Why? Borrow against assets of new subsidiary Share for share exchange for existing shareholders	Share buyout: via a new holding company Trade sale: disposal of goodwill & trade followed by liquidation Share buyout: by individuals Purchase of own shares	Guides Succession planning: Buyouts Management Buyout: what are your options? Employee Ownership Trusts Case study Case Study 5: Management buyout: via new holdco Paperwork Forming a group: documents

Exit planning for key shareholders, leaving remaining shareholders in control For? Buyout retiring or dissenting shareholder	Use company funds to buy shares Company purchase of own shares Borrow against company assets to buy shares Buyout via a holding company	Guides Purchase of own shares Purchase of own shares: out of capital Masterclass Purchase of own shares Masterclass checklist Case studies Case Study 6: POS: Buyout retiring shareholder Case Study 5: Management buyout: via new holdco

Expand the businesses Merge two or more business		Guides Groups: at a glance

Stamp Duty: Share for Share exchange	Relief for a share for share exchange What are disqualifying events? Examples of cases where relief applies and does not.	Guides Stamp Duty: Share for Share exchanges

Close down the company	Liquidation Striking off	Guides Ceasing trading: What are your options? TAAR: Distributions on winding up (anti-phoenixing rules) Checklists Striking off: step-by-step

Case Studies

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Topic/case study

1. Trading company with two trading activities:

Separate its two trades into different companies.
With same owners or split between existing owners.

Why?

Potential sale of one trade.
Separation/fallout of business partners.

See Case Study 1: Tradeco: demerger of two trades

2. Trading company with an investment property or investment business:

Separate out activities into separate companies

Why?

Potential sale of trade or investment business or investment asset
To preserve Capital Gains Tax (CGT) Business Asset Disposal Relief (BADR) or Inheritance Tax (IHT) Business Property Relief (BPR).

See Case Study 2: Tradeco: Demerger of its investment business

3. Trading company with investment subsidiary

Break up the group and create two stand-alone companies

Why?

Potential sale of trade, trading company or investment business.
To preserve CGT BADR or IHT BPR.

See Case Study 3: Tradeco demerger of investment subsidiary

4. Investment company with trading subsidiary:

Break up the group and create two stand-alone companies

Why?

Potential sale of trading company or investment business.
To preserve BADR or BPR.

See Case Study 4: Investco demerger of trading subsidiary

5. Management buyout

Form new holding company to buy out existing shareholders

For?

Buyout by existing shareholders or by a combination of existing shareholders and employees

Why?

Borrow against assets of new subsidiary
Share for share exchange for existing shareholders

See Case Study 5: Management buyout: via new holdco

6. Purchase of own shares

A purchase, by a company of its own shares from a retiring shareholder.

For?

Buyout retiring or dissenting shareholder

Why?

Use company funds to buy shares
Borrow against company assets to buy shares

See Case Study 6: POS: Buyout retiring shareholder

7. Creating a group

Adding a new holding company, or
Creating new subsidiaries

Why?

To separate new or different activities
To create a holding company for a share scheme or investment relief
Asset protection

See Case study 7: Creating a group

7. Stamp Duty: Share for Share exchange

What relief is there on a share for share exchange?
What are disqualifying events?
Examples of cases where relief applies and does not.

See Stamp Duty: Share for Share exchanges

Capital or dividend calc

This works out the difference in the way that capital and income distribution are taxed. You can adjust the figures to suit, the ones provided are for illustration purposes only.

Capital or Dividend

Calculates the tax on a capital distribution compared to an income distribution.

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