Demerger tax at stake calculator

It estimates four charges that could arise if a business or property were separated without the right reliefs: income tax on a distribution for the shareholders, corporation tax on the company's gain, SDLT on land moving between companies, and stamp duty on shares. Next to each one it shows the relief that, where the conditions are met, stops that charge arising.

Not usually all at once, and not on every route. Some charges overlap, and which ones are relevant depends on how the demerger is structured. The calculator shows the scale of what the reliefs protect, which is why the route, the order of the steps and HMRC clearance matter so much.

If a company hands shareholders a business or the shares in a subsidiary, that's normally a distribution, like a dividend paid in assets rather than cash. Without an exemption, it's taxed as dividend income at the shareholders' rates. A statutory demerger can be an exempt distribution, and capital reduction and liquidation demergers are structured as reorganisations so the shareholders are not treated as receiving income.

When a company disposes of assets to someone it's connected with, it's normally treated as selling them at market value, so any increase in value is a chargeable gain. Where the conditions in section 139 TCGA 1992 are met, assets transferred as part of a reconstruction move at no gain and no loss, so no corporation tax arises on the transfer.

It uses the SDLT rates for non-residential and mixed-use property in England and Northern Ireland: nothing on the first £150,000, 2% on the next £100,000 and 5% above £250,000. Wales and Scotland have their own taxes, land transaction tax and land and buildings transaction tax, with different rates and reliefs.

Depending on the route, group relief, reconstruction relief or acquisition relief in Schedule 7 to the Finance Act 2003 may apply. Each has conditions and anti-avoidance rules, and group relief can be clawed back if the company that received the land leaves the group within three years while still holding it. The SDLT position should be planned from the start.

Stamp duty at 0.5% applies to transfers of shares for consideration. Reliefs in sections 75 to 77 of the Finance Act 1986 can apply to reconstructions and to a new holding company acquiring a company's shares. Section 77A can deny relief where there are arrangements for a change of control, so a planned sale needs care.

It uses 2026/27 rates: dividend tax at 10.75%, 35.75% or 39.35% depending on the shareholders' band, corporation tax at the 25% main rate, stamp duty at 0.5% rounded up to the nearest £5, and SDLT non-residential rates. Allowances and reliefs such as the dividend allowance are ignored to keep the illustration simple.

Where the route is right and the conditions are met, the demerger itself can often be carried out without any of these charges arising. There are still professional costs, and some charges, such as degrouping charges or SDLT clawbacks, can arise later if things change, so the conditions need watching afterwards.

No. The calculation runs in your browser and nothing you enter is stored or sent to us. If you'd like us to look at your figures properly, get in touch and we'll respond the same working day.