Capital gains tax on a demerger: at shareholder level and company level.

Usually not at the time, where the demerger is structured to meet the conditions. Shareholders who receive shares in a new company in place of, or alongside, their existing shares are normally treated as if nothing had been sold. The gain is effectively deferred until they later sell the shares. This depends on reliefs such as section 136 TCGA 1992, which have conditions and an anti-avoidance rule.

Section 136 applies where, as part of a scheme of reconstruction, a new company issues shares to the shareholders of the original company in proportion to their holdings. The shareholders are treated as exchanging their original holdings for the new shares, and the share reorganisation rules then apply as if the two companies were the same. So no disposal arises, and the original base cost carries across.

It's defined in Schedule 5AA TCGA 1992. In outline, the new company issues ordinary shares only to the ordinary shareholders of the original company, shareholders in the same class are treated equally, and the business of the original company continues, in whole or substantially in whole, in the successor company or companies. A court-approved arrangement is an alternative to the business continuity condition.

For a direct statutory demerger, where a company distributes shares in its subsidiary to shareholders, section 192 TCGA 1992 says the distribution isn't a capital distribution and treats it as a reorganisation of share capital. For an indirect demerger, HMRC's guidance is that the reconstruction relief in section 136 normally applies instead. Either way, the shareholders usually have no disposal at the time.

There can be, so it needs planning. Where a business moves from one company to another under a scheme of reconstruction, section 139 TCGA 1992 can treat the transfer as made at no gain and no loss, so the receiving company takes over the original cost. Where a company distributes shares in a subsidiary, it is disposing of them, so whether a gain arises, and whether an exemption covers it, needs checking.

Sometimes. Section 139 needs the transfer of a business, or part of one. HMRC accepts that a controlling holding in a trading subsidiary counts as part of a parent company's business, but its guidance notes there may be a problem where a subsidiary only holds investments or property. Whether a property holding is a business in its own right depends on the facts, so it's examined early.

For transactions from 26 November 2025, sections 137 and 139 TCGA 1992 contain a main purpose test. If a main purpose of the arrangements is to reduce or avoid tax, HMRC can make just and reasonable adjustments, including denying the relief. This replaced the older bona fide commercial reasons test. HMRC says deferral alone, consistent with the purpose of the reliefs, is not treated as a tax advantage.

Your original base cost is shared between your shares in the original company and your new shares, in proportion to their market values. For unquoted shares, HMRC's guidance is that the split is made using market values at the date of the later disposal that requires the calculation. For quoted shares, values on the first day of quotation are used. Keeping good valuation records helps later.

If a company acquired an asset from another group company at no gain and no loss, and then leaves the group within six years still owning it, section 179 TCGA 1992 can treat it as having sold and reacquired the asset at market value at the time it received it. Demergers move companies out of groups, so any earlier intra-group transfers, and transfers made as part of the demerger itself, need checking.

For statutory demergers, yes. Section 192 TCGA 1992 says the degrouping charge doesn't apply where a company leaves a group only because of an exempt distribution, unless a chargeable payment is made within five years. For other routes, there's no blanket exemption, although other rules can help, for example where associated companies leave together, or where the gain is added to share sale proceeds covered by SSE.

Possibly. Your new shares are usually treated as the same asset as your original shares, acquired when you acquired those. But the BADR conditions, including the company being your personal company and a trading company, and you being an officer or employee, are applied to the company whose shares you sell, throughout the two years before the sale. Where that company is new, this needs checking carefully.

This is an area to check on the facts rather than assume. The legislation contains an express rule carrying back the conditions to the original company for EMI shares after a reorganisation, but there is no equivalent general rule for ordinary shares. If you might sell within two years of a demerger, or the demerged company is newly formed, the BADR position should be reviewed before the demerger, not after.

Yes. Section 169Q TCGA 1992 allows an election that disapplies the normal no-disposal treatment for a reorganisation, so a gain arises at that point and BADR can be claimed on it if the conditions are met then. It applies to all the shares in the reorganisation, not some of them. It can make sense where you might not qualify for BADR on the new shares later.

For individuals in 2026/27, gains are taxed at 18% within the basic rate band and 24% above it, after the £3,000 annual exempt amount. Business Asset Disposal Relief, where available, gives an 18% rate on up to £1m of lifetime qualifying gains. Companies pay corporation tax on gains instead. A well-structured demerger aims to avoid any charge arising at the time.

It's usually sensible. A clearance under section 138 TCGA 1992 confirms HMRC's view that the section 137 anti-avoidance rule won't apply to the share exchange or reconstruction. A clearance under section 139(5) does the same for the transfer of a business between companies. Both can be included in a single application with the other clearances a demerger needs.

Cash, or anything other than shares, falls outside the share-for-share reliefs, so it can be a disposal of part of the shareholding and taxed as a capital gain, or treated as income in some cases. It may also put the reliefs in question if it affects the scheme of reconstruction conditions. Where value needs balancing, it's usually better done inside the companies before the split.