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Last Updated: 14 November 2020
You can reorganise or separate company activities and different subsidiaries using a variety of different methods.
This series of super practical tax guides provide an outline of the tax treatment together with step guides and tax clearance templates.
Pick from the topics below.
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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
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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) Entrepreneurs' Relief (ER) or IHT Business Property Relief (BPR).
See Case Study 2: Tradeco: Demerger of its investment business
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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 ER or BPR.
See Case Study 3: Tradeco demerger of investment subsidiary
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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 CGT ER or BPR.
See Case Study 4: Investco demerger of trading subsidiary
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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
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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
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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
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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
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