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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?
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Tools |
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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
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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
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Guides
Case study & tax clearance template
Paperwork
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Reorganise share capital:
- To create different share classes
- To change share rights
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With shareholder approval: amend by Companies Act 2006 resolution:
- Bonus & rights issues
- Sub-division
- Alteration of rights
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Guides
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Repay share capital:
- Return share capital to shareholders, or
- Create a credit to the profit and loss reserve
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Guides
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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.
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Share sale following:
- Liquidation demerger
- Capital reduction demerger
Asset sale
Move up or across or down: transfer of business/assets around a group
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Guides
Case studies & tax clearance templates
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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).
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Just trades:
- Statutory demerger
- Capital reduction demerger
- Liquidation demerger
Trades or business:
- Liquidation demerger
- Capital reduction demerger
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Guides:
Case studies: just trades
Case studies: a mixed business
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Tidy up the business or assets or plan for a potential future sale
- Alternatives to a demerger
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- Distribution: de-envelope assets by transfer to shareholders
- Asset sale to a new company or shareholder
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Guides
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Buyout
- By management
- By a third party
Why?
- Borrow against assets of new subsidiary
- Share for share exchange for existing shareholders
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- Share buyout: via a new holding company
- Trade sale: disposal of goodwill & trade followed by liquidation
- Share buyout: by individuals
- Purchase of own shares
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Guides
Case study
Paperwork
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Exit planning for key shareholders, leaving remaining shareholders in control
For?
- Buyout retiring or dissenting shareholder
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Use company funds to buy shares
- Company purchase of own shares
Borrow against company assets to buy shares
- Buyout via a holding company
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Guides
Masterclass
Case studies
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Expand the businesses
- Merge two or more business
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Guides
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Stamp Duty: Share for Share exchange
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- Relief for a share for share exchange
- What are disqualifying events?
- Examples of cases where relief applies and does not.
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Guides
Stamp Duty: Share for Share exchanges
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Close down the company |
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Guides
Checklists
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Case Studies
Health warning: see our Terms & Conditions
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
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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) Business Asset Disposal Relief (BADR) or Inheritance Tax (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 BADR or IHT 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 BADR 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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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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