We are celebrating this festive time of year with a Christmas Selection Box of different tax reliefs and exemptions. As it is the time for giving and sharing, we hope that our "Box" will save you pounds rather than adding them!

C-H-R-I-S-T-M-A-S

S is for share for share exchange and reconstruction reliefs.

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

  • Where certain strict conditions are met, a company or group can be restructured on a tax free basis, such as putting a group in place, or demerging a company or trade from a group.
    • Advance clearance from HMRC is usually required.
  • Stamp duty is an important consideration which is sometimes overlooked. The reliefs available must be claimed within a strict time limit and the conditions are very prescriptive.
  • Certain reorganisation methods such as statutory demergers require a trading business and cannot be done when a sale is in prospect.
  • Each aspect of the transaction must be analysed in respect of all relevant taxes. In particular, continuing eligibility for reliefs such as Entrepreneurs Relief must be considered.
  • Legal advice and assistance is usually required to ensure company law requirements are met and to help with drafting the necessary documentation.

FAQs: Reorganisations and share exchanges

I cannot use a statutory demerger to split out my trading company as there is a sale in prospect. What are my options?

You should consider a liquidation demerger or a capital reduction demerger. See Case study 4 in our reorganisations zone.

What are the simplest options for a management buyout? 

The four simplest options are generally: 

  1. Management buyout using a holding company. See Case Study 5: Management Buyout: via new holdco
  2. Company sale of trade to manager followed by a liquidation of company to return capital to existing shareholders
  3. Purchase of own shares by the company. See Case Study 6: POS: buyout retiring shareholder
  4. Share purchase by manager from shareholders on a personal basis.

How do I form a group without having to pay any tax?

  • You can do this by way of a share for share exchange.
  • You are likely to need advance clearance from HMRC and to make a stamp duty relief claim.

See Case Study 7: Creating a group

 

Our selection box so far...

C - H - R - I - S - T M A S

Useful resources for subscribers:

Demergers: what are your options?

Management Buyout: what are your options?

Stamp duty: share for share exchanges

Selling the business: where do I start?

Exit strategies: Index

At a glance:

An Index to Reorganisations and Demergers

Entrepreneurs' Relief

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