HMRC clearances

Because the reliefs that make a demerger tax neutral have anti-avoidance rules based on purpose, and a clearance gives HMRC's confirmation on those rules before anything irreversible happens. If HMRC has questions, the plan can be explained or changed while it is still a plan. Some clearances must also be obtained before a particular step, such as the issue of shares.

Usually clearance under section 138 TCGA 1992 for the shareholders, section 139(5) for the company transferring its business, and section 701 ITA 2007 on transactions in securities. Where a new holding company is inserted first, the share exchange is usually covered in the same application. The exact set depends on the steps.

The main one is section 1091 CTA 2010, which asks HMRC to confirm that a distribution will be an exempt distribution. Capital gains and transactions in securities clearances are often requested at the same time. A separate clearance under section 1092 can confirm that a later payment to shareholders won't be a chargeable payment.

For the main statutory clearances, HMRC must respond within 30 days of receiving a complete application. It can ask for further particulars, usually within 30 days, and then has a further 30 days from your reply. Building that time into the timetable from the start avoids pressure on the implementation date.

The anti-avoidance rules in sections 137 and 139 TCGA 1992 now apply where a main purpose of the arrangements is to reduce or avoid tax, replacing the old bona fide commercial reasons test, from 26 November 2025. Clearance is still available, but now confirms HMRC is satisfied there are no arrangements to which the rule applies.

No. HMRC doesn't charge for statutory clearance applications. The cost is in preparing a complete, accurate application and dealing with any questions, which is usually done by the tax adviser as part of the demerger work.

A clearance binds HMRC on the question it answers, for the transaction as described. It doesn't protect a different transaction, facts that weren't disclosed, or taxes the clearance doesn't cover. Keeping the implementation in line with the application, and taking advice before any change, preserves its value.

There is no advance clearance in the same way. Stamp duty reliefs on share transfers are claimed by sending the transfer documents to HMRC for adjudication after the transaction. SDLT relief is claimed on the land transaction return. Both need their own conditions checked, separately from the direct tax clearances.

The transactions in securities rules can tax as income what would otherwise be a capital receipt for shareholders of close companies, where a main purpose is an income tax advantage. Section 701 ITA 2007 lets shareholders ask HMRC in advance to confirm the rules won't apply. It is commonly included in demerger applications.

Nothing has been implemented, so options remain. You can provide more information, change the proposal to address HMRC's concerns, or in some cases ask the tribunal to decide. Going ahead without clearance is possible, but means accepting the risk that HMRC later challenges the tax treatment.

100% of HMRC clearances obtained (50+ applications). Our work is led by a Chartered Tax Adviser with 15+ years' experience, and we prepare each application from a full understanding of the facts and the commercial reasons, then deal with HMRC's questions through to clearance.