The demerger cost that's easiest to overlook.

It can be, because many demergers involve transferring shares for consideration. Stamp duty on a transfer of shares is 0.5% of the consideration, rounded up to the nearest £5. Reliefs under the Finance Act 1986 can remove the charge on reconstructions and share-for-share exchanges where the conditions are met. Some steps, such as a dividend paid directly in shares, may involve no consideration and so no duty.

Section 75 of the Finance Act 1986 relieves stamp duty where a company acquires the whole or part of another company's undertaking in exchange for issuing non-redeemable shares to all of that company's shareholders. Afterwards, each shareholder of each company must be a shareholder of the other, in the same proportions. The acquisition must be for bona fide commercial reasons and not mainly to avoid tax.

Section 77 of the Finance Act 1986 relieves stamp duty on a share-for-share exchange, such as inserting a new holding company. The new company must acquire the whole of the target's issued share capital for shares only, and the shareholdings must mirror the old ones, class by class and in the same proportions. It must be for bona fide commercial reasons and there must be no disqualifying arrangements.

They are arrangements where it's reasonable to assume that a purpose is for a particular person, or particular persons together, to obtain control of the new holding company. If they exist, section 77 relief is denied. A person who has held at least 25% of the target throughout the relevant period is excluded. This rule commonly matters where a holding company insertion is the first step of a partition or a sale.

Often only in part. Section 75 relief needs the same shareholders, in the same proportions, in both companies afterwards, which is exactly what a partition doesn't produce. HMRC's guidance also gives examples where section 77 relief is denied because of arrangements for particular shareholders to gain control. Some stamp duty may therefore be payable, and it should be costed when the route is chosen.

The relevant documents are sent to HMRC's Stamp Taxes team for adjudication, which is compulsory to obtain section 75 or section 77 relief. HMRC checks the conditions and confirms the position, now usually by letter rather than a physical stamp. Once adjudicated, the stamp duty status of that document is settled. The claim needs supporting information, so it's prepared alongside the legal documents.

It can be. A transfer of land to a connected company is normally treated as made for at least market value, so SDLT could apply on the full value of the property even if no money changes hands. Reliefs in Schedule 7 to the Finance Act 2003 can remove or reduce the charge where the conditions are met, which is why SDLT is planned early.

For non-residential and mixed-use freehold property in England and Northern Ireland, SDLT is 0% on the first £150,000, 2% on the portion from £150,001 to £250,000, and 5% above £250,000. On a valuable commercial property that adds up quickly, which is why reliefs matter on a demerger. Residential property has different rates and rules, so it needs checking separately.

Group relief exempts a transfer of land between companies in the same group, broadly where one is a 75% subsidiary of the other or both are 75% subsidiaries of a third company. It isn't available where there are arrangements for the buyer company to leave the group, for someone to gain control of it but not the seller, or for outside parties to provide the consideration. Those arrangements are common in demergers.

If the company that received the property leaves the seller's group within three years of the transfer, or later under arrangements made in that period, while still holding the property, the relief can be withdrawn and SDLT becomes payable. The relief isn't withdrawn just because the seller leaves the group, but a later change in control of the buyer can then trigger the clawback.

Reconstruction relief, in Part 2 of Schedule 7, exempts land transferred as part of a reconstruction where the acquiring company issues non-redeemable shares to all the target's shareholders, and afterwards each shareholder holds both companies in the same proportions. It must be for bona fide commercial reasons and not mainly to avoid tax. Because of the mirror-image requirement, it doesn't usually help on a partition.

Acquisition relief limits SDLT to 0.5% of the chargeable consideration where a company acquires an undertaking in exchange for shares issued to the target company or to all or any of its shareholders. The undertaking's main activity must be a trade that isn't mainly dealing in land, and there are limits on cash consideration. That trade condition means it rarely helps where the business being moved is property investment.

Yes. If control of the acquiring company changes within three years of the transfer, while it still holds the property, the relief can be withdrawn and SDLT becomes due. That matters if a sale of the company, or a further reorganisation, is planned soon after the demerger. Clawback periods should be checked against any sale timetable before the demerger goes ahead.

Yes. Group, reconstruction and acquisition reliefs are claimed on the SDLT return, which must be filed, with any tax paid, within 14 days of completion. A relief doesn't remove the need to report the transaction. HMRC can enquire into the claim afterwards, and there's no statutory advance clearance for SDLT, so the analysis needs to be right before completion.

SDLT only applies in England and Northern Ireland. Property in Scotland is subject to land and buildings transaction tax, and property in Wales to land transaction tax. Both have their own rates and their own versions of group and reconstruction reliefs, with differences in the detail. A demerger involving property across the UK needs each regime checked separately.

Occasionally. Where reliefs aren't available, for example on a partition involving valuable property, stamp duty and SDLT can be a significant cost. Often the steps can be ordered or structured so the reliefs do apply, but not always. We cost the stamp taxes for each realistic route at the start, so you can decide with the full picture rather than discover it at completion.