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What is a company reorganisation or reconstruction? What tax reliefs apply to a company reorganisation, a share for share exchange, reconstruction or other transaction involving shares?

You can reorganise or separate company activities and different subsidiaries using a variety of different methods.

The super-practical tax guides in this index provide an outline of the tax treatment together with step guides and tax clearance templates.

Instructions

1. Using the 'Transactions Planner, decide what you want to do and what Option works best.

2. Follow the links to the Tools to find the tools for the job.

3. Check out our Case studies to find your topic.

Transactions Planner

Reorganisation Planner

What do you want to do?

 Aim     Options    Tools
         

Creating a group

  • Inserting a new holding company
  • Creating new subsidiaries

Why?

  • To separate new or different activities
  • To create a holding company for a share scheme or investment relief
  • Asset protection
 

 

 

Add a new subsidiary:

  • Incorporation of a new subsidiary by an existing company

Form a group

  • Insert a new holding company via share for share exchange
 

Guides

Case study & tax clearance template

Paperwork

 

         

Reorganise share capital:

  • To create different share classes
  • To change share rights
 

With shareholder approval: amend by Companies Act 2006 resolution:

  • Bonus & rights issues
  • Sub-division
  • Alteration of rights
 

Guides

         

Repay share capital:

  • Return share capital to shareholders, or
  • Create a credit to the profit and loss reserve
 
  • Capital reduction

 

 

Guides

         

Prepare for immediate sale:

  • Move saleable activity to a new clean company
  • Separate the activities of a company into two companies

Why?

  • The potential sale of one trade.
  • Separation/fallout of business partners.
 

Share sale following:

  • Liquidation demerger
  • Capital reduction demerger

Asset sale

Move up or across or down: transfer of business/assets around a group

 

Guides

Case studies & tax clearance templates

 

         

Tidy up the business or assets or plan for a potential future sale 

  • Split activities to separate out two trades

Tidy up or plan for a potential future sale:

  • Demerge a trading subsidiary
  • Demerge an investment subsidiary
  • Streamline a group

Why?

  • Potential sale of trade or investment business or investment asset
  • To preserve Capital Gains Tax (CGT) Business Asset Disposal Relief (BADR) or Inheritance Tax (IHT) Business Property Relief (BPR).
 

Just trades:

  • Statutory demerger
  • Capital reduction demerger
  • Liquidation demerger

Trades or business:

  • Liquidation demerger
  • Capital reduction demerger
 

Guides:

Case studies: just trades

Case studies: a mixed business

         

Tidy up the business or assets or plan for a potential future sale 

  • Alternatives to a demerger
 
  • Distribution: de-envelope assets by transfer to shareholders
  • Asset sale to a new company or shareholder
 

Guides

         

Buyout 

  • By management
  • By a third party

Why?

  • Borrow against assets of new subsidiary
  • Share for share exchange for existing shareholders
 
  • Share buyout: via a new holding company
  • Trade sale: disposal of goodwill & trade followed by liquidation
  • Share buyout: by individuals
  • Purchase of own shares 
 

Guides

Case study

Paperwork

 

         

Exit planning for key shareholders, leaving remaining shareholders in control

For?

  • Buyout retiring or dissenting shareholder 

 

 

 

Use company funds to buy shares

  • Company purchase of own shares

Borrow against company assets to buy shares

  • Buyout via a holding company
 

Guides

Masterclass

Case studies

         
 

Expand the businesses

  • Merge two or more business
     

Guides

 

         
 

Stamp Duty: Share for Share exchange

   
  • Relief for a share for share exchange
  • What are disqualifying events?
  • Examples of cases where relief applies and does not.
 

Guides

Stamp Duty: Share for Share exchanges

         
Close down the company  
  • Liquidation
  • Striking off
 

Guides

Checklists

 

 

Case Studies

 

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Topic/case study

1. Trading company with two trading activities:

  • Separate its two trades into different companies.
  • With same owners or split between existing owners.

Why?

  • Potential sale of one trade.
  • Separation/fallout of business partners.

See Case Study 1: Tradeco: demerger of two trades

2. Trading company with an investment property or investment business:

  • Separate out activities into separate companies

Why?

  • Potential sale of trade or investment business or investment asset
  • To preserve Capital Gains Tax (CGT) Business Asset Disposal Relief (BADR) or Inheritance Tax (IHT) Business Property Relief (BPR).

See Case Study 2: Tradeco: Demerger of its investment business

3. Trading company with investment subsidiary

  • Break up the group and create two stand-alone companies

Why?

  • Potential sale of trade, trading company or investment business.
  • To preserve CGT BADR or IHT BPR.

See Case Study 3: Tradeco demerger of investment subsidiary

4. Investment company with trading subsidiary:

  • Break up the group and create two stand-alone companies

Why?

  • Potential sale of trading company or investment business.
  • To preserve BADR or BPR.

See Case Study 4: Investco demerger of trading subsidiary

5. Management buyout

  • Form new holding company to buy out existing shareholders

For?

  • Buyout by existing shareholders or by a combination of existing shareholders and employees 

Why?

  • Borrow against assets of new subsidiary
  • Share for share exchange for existing shareholders

See Case Study 5: Management buyout: via new holdco

6. Purchase of own shares

  • A purchase, by a company of its own shares from a retiring shareholder.

For?

  • Buyout retiring or dissenting shareholder 

Why?

  • Use company funds to buy shares
  • Borrow against company assets to buy shares

See Case Study 6: POS: Buyout retiring shareholder

7. Creating a group

  • Adding a new holding company, or
  • Creating new subsidiaries

Why?

  • To separate new or different activities
  • To create a holding company for a share scheme or investment relief
  • Asset protection

See Case study 7: Creating a group

7. Stamp Duty: Share for Share exchange

  • What relief is there on a share for share exchange?
  • What are disqualifying events?
  • Examples of cases where relief applies and does not.

See Stamp Duty: Share for Share exchanges

Capital or dividend calc

This works out the difference in the way that capital and income distribution are taxed. You can adjust the figures to suit, the ones provided are for illustration purposes only.

Capital or Dividend

Please enter or adjust amounts shown, as required. If the lifetime Business Asset Disposal Relief (BADR) allowance has been used in part or in full already, please provide the amount now available (if the disposal qualifies for BADR).

Amount of payment
CGT Annual Exemption
Dividend Allowance
BADR Lifetime Allowance
Costs for CGT
Calculates the tax on a capital distribution compared to an income distribution.

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