Split the business. Not the tax bill.

A demerger splits one company or group into two or more separate companies, usually owned by the same shareholders. It's used to separate a trade from property, to split two different businesses, or to let shareholders go their separate ways. Done properly, reliefs can mean the split itself triggers no immediate capital gains tax, corporation tax, income tax or stamp duty, but the conditions are strict, so the route and the order of the steps matter.

Often, yes, where the conditions for the reliefs are met. Shareholders can usually treat their new shares as a continuation of the old ones, companies can transfer assets without a chargeable gain, and stamp duty and SDLT reliefs can apply. Each relief has conditions and anti-avoidance rules, and some can be clawed back if things change afterwards. That's why HMRC clearance is normally obtained before anything moves.

There are four main routes. A statutory demerger, under the Corporation Tax Act 2010, for trading businesses. A capital reduction demerger, which uses a reduction of share capital and works for property and investment businesses. A liquidation demerger under section 110 of the Insolvency Act 1986. And a partition, where shareholders each take a different business, usually using one of the last two routes.

It depends on what's being separated, who will own each part, whether a sale is planned, and the company's reserves. A statutory demerger only works where both sides are trading. Separating investment property usually needs a capital reduction or liquidation demerger. Our free route finder gives you an indication in about two minutes, and we can confirm the right route on a call.

Clearance isn't compulsory, but for almost every demerger it's strongly advisable. It confirms in advance that HMRC accepts the reliefs apply, and that avoiding tax is not a main purpose of the transaction. Several clearances can be requested in a single application, and HMRC must respond within 30 days of a complete one. Buyers, lenders and lawyers often expect to see clearance before relying on the structure.

Most demergers take two to four months from first advice to completion. The main stages are the feasibility work and step plan, HMRC clearance (30 days from a complete application, longer if HMRC asks questions), and the legal steps such as board and shareholder resolutions, solvency statements and filings. A liquidation demerger can take longer because a liquidator is involved.

It depends on the route, the size of the group and how many advisers are involved, so we don't publish fees. A demerger usually needs tax advice and clearance applications, legal work from a corporate solicitor, and sometimes valuations or a liquidator. After a short call we'll give you a clear, fixed proposal for the tax work, so you know the cost before committing.

Yes. Separating property from a trading business is one of the most common reasons to demerge. It can protect the property from the trading risks, allow the trade to be sold while the family keeps the property, or make succession simpler. Because property investment isn't a trade, a statutory demerger usually isn't available, so a capital reduction or liquidation demerger is normally used.

Yes. This is called a partition. Each shareholder or family takes a different business or set of assets, and the company is split accordingly. With the right route, valuations and clearances, it can often be done without immediate tax charges. The reliefs have extra conditions where shareholders end up owning different businesses, so the steps need careful planning.

Sometimes, but this is where most demerger problems start. Several reliefs are denied or withdrawn if a sale is already arranged, or if the demerger is mainly to save tax on the sale. The timing, the commercial reasons and what's been agreed with the buyer all matter. If a sale is on the horizon, talk to us before any discussions with a buyer go further.

It can. Shares received in a demerger usually inherit the history of the old shares, but whether Business Asset Disposal Relief is available on a later sale depends on the new company being a trading company and you meeting the conditions for two years before the sale. Separating investment property out of a trading company can also help the trading company meet the trading tests.

Usually capital gains tax for the shareholders, corporation tax on chargeable gains for the companies, income tax if any step is treated as a distribution, stamp duty on share transfers, and SDLT (or the Welsh or Scottish equivalents) where land moves. Degrouping charges, VAT on any transfer of a business, and the effect on future reliefs such as Business Relief for inheritance tax also need checking.

Just a conversation. It helps to have the latest accounts, a simple group structure chart, a list of shareholders and their holdings, and an idea of what you want to separate and why. If a sale, refinancing or family change is planned, tell us about it at the start, as it affects which route will work.

Demerger Tax is a specialist practice advising UK companies and their shareholders on demergers and reorganisations. Advice is led by a Chartered Tax Adviser, supported by a Big 4-trained team that includes ICAEW and ACCA Chartered Accountants. We've obtained 100% of the HMRC clearances we've applied for, across more than 50 applications. We're the demerger practice of the team behind Transaction Tax Partners.

Yes, and we prefer to. We focus only on the tax side of the demerger, so we don't compete with your accountant for compliance work or with your solicitor for the legal documents. We prepare the step plan and clearance applications, and work alongside them so everyone follows the same plan.

The same working day. Send an enquiry, email or WhatsApp message and a senior adviser will reply the same working day. The first conversation is confidential and without obligation.