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Demerger tax specialists · Chartered Tax Advisers

Split the business. Not the tax bill.

Specialist tax advice on demergers: separating property from trade, letting shareholders go their separate ways, and preparing for a sale. Every route compared, every HMRC clearance handled.

We respond the same working day

One company splitting into two companies, owned by the same shareholders, with HMRC clearance and tax reliefs in place.ShareholdersONE COMPANYTradeCothe tradePropCothe propertyHMRC clearanceCGT reliefSDLT relief
  • 100%

    of HMRC clearances obtainedacross 50+ applications

  • £100m+

    of assets separated

  • £40m

    largest group demerged

  • 15+

    years' experience

Why companies demerge

One company. Two futures.

Businesses outgrow the structure they started with. A demerger gives each part its own company, its own owners and its own path, without the tax cost of selling assets from one company to another.

  • Protect property from trading risk

    Move valuable property out of the trading company, so it isn't exposed to the trade's creditors.

  • Sell the trade, keep the property

    Buyers rarely want your buildings. Separate them first and sell a clean trading company.

  • Shareholders going separate ways

    Split the company so each shareholder or family takes the business they want to run.

  • Pass different businesses to different children

    Give each branch of the family its own company, with inheritance tax reliefs kept in view.

  • Ring-fence a new venture

    Keep a riskier new business apart from the established one, with separate ownership and finance.

  • Get ready for investment or a sale

    Investors want a focused business. A demerger can make the group simpler to value and to buy.

What a demerger does

Same owners. Separate companies.

After a demerger, the shareholders own two companies instead of one. Each can be sold, financed or passed on without affecting the other. Throughout this site, the two new companies are always shown in this colour and this one.

BEFOREShareholdersThe companyTradePropertyAFTERShareholdersTradeCothe tradePropCothe property
Separating two businesses. One company runs two different activities, often a trade and a property portfolio. After the demerger, each sits in its own company, owned by the same shareholders, so each can be sold, financed or passed on separately. Company A after the split Company B after the split New company

The routes

Four ways to demerge. One will suit you best.

Each route has different conditions, costs and clearances. Choosing the right one is the most important decision in a demerger.

Capital reduction demerger

The most widely used route for private groups. A new holding company is inserted, then reduces its capital so the business being separated passes to a second new company.

Works for property
Yes
Needs distributable reserves
No
Shareholders can split
Yes
Liquidator needed
No
How it works in detail
BEFOREShareholdersThe companyTradePropertyAFTERShareholdersHoldConewNewConewTradeCoPropCo
  1. 1Insert a new holding company by share-for-share exchange.
  2. 2The holding company reduces its share capital, backed by a solvency statement.
  3. 3The business being separated moves to a new company, which issues shares to the shareholders.
Capital reduction demerger. A new holding company is inserted, then reduces its share capital. In return, the business being separated passes to a second new company, which issues its shares to the same shareholders. No distributable reserves are needed and it works for property and investment businesses. Company A after the split Company B after the split New company

Free tool · 2 minutes

Which demerger route fits your company?

Six questions. You'll see the routes ranked, the HMRC clearances each one needs, and what to watch out for. Nothing is stored.

The tax map

Every tax a demerger touches.

A demerger can touch eight different taxes and charges. Each has its own relief, its own conditions, and sometimes its own clawback. We plan them together.

  • Shareholders

    Capital gains tax

    New shares treated as the old ones (s127, s136 TCGA)

  • The companies

    Corporation tax on gains

    Assets move at no gain, no loss (s139 TCGA)

  • Shareholders

    Income tax

    Exempt distribution, or a capital route

  • Share transfers

    Stamp duty

    Reconstruction and acquisition reliefs (FA 1986)

  • Land and buildings

    SDLT, LTT or LBTT

    Group, reconstruction or acquisition relief

  • Companies leaving a group

    Degrouping charges

    Exemptions for demergers, if the conditions hold

  • Shareholders

    Transactions in securities

    Clearance under s701 ITA 2007

  • BADR and Business Relief

    Future reliefs

    Planned so the new companies still qualify

How it works

From first call to two companies.

Most of the risk in a demerger sits in the order of the steps. We plan the whole sequence before anything moves, and obtain clearance first.

How we work
  1. 1

    A call, the same day

    Tell us what you want to achieve. A senior adviser responds the same working day.

  2. 2

    Route and step plan

    We compare the routes, model the tax and set out every step in order.

  3. 3

    HMRC clearance

    One application covering every clearance. HMRC responds within 30 days of a complete one.

  4. 4

    Implementation

    We work with your solicitor and accountant so each step follows the cleared plan.

  5. 5

    Filings and after-care

    Returns, stamp duty and SDLT filings, and the conditions to keep an eye on afterwards.

Accountants and solicitors: bring us in on the tax.

We only do the tax side of the demerger, so your client stays your client. We prepare the step plan and the clearances, and work to your timetable.

For introducers

FAQs

Demerger questions, answered

What is a demerger?

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.

Can a demerger be done without paying tax?

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.

What are the main types of demerger?

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.

Which demerger route is right for my company?

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.

Do I need HMRC clearance for a demerger?

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.

How long does a demerger take?

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.

How much does a demerger cost?

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.

Can I demerge property out of my trading company?

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.

Can shareholders split a company and go their separate ways?

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.

Can I demerge just before selling my business?

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.

Does a demerger affect Business Asset Disposal Relief?

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.

What taxes need to be considered on a demerger?

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.

What do I need to get started?

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.

Who is Demerger Tax?

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.

Do you work with our existing accountant and solicitor?

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.

How quickly will you respond?

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.

Talk to us before anything moves.

In a demerger, the order of the steps is everything. A confidential first call, with a reply the same working day.

Or write to taxadvisory@aswatax.co.uk

Chartered Tax Adviser
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