Demerger to separate assets from a company before sale

A demerger can be used when selling your company to take out the parts a buyer does not want to include in the transaction in a tax effective manner.

If you have already made the decision to sell your company and a buyer has said that they do not want the property, investment assets or a smaller trade as part of the deal, then you might think you could be stuck with a costly tax bill for extracting the assets prior to a sale.

All is not lost and it should be possible to demerge the elements of the company that are not required by the buyer and transfer them outside of the existing company ownership into a new company using a demerger.

The big advantage with demerger transactions is that you can seek HMRC clearance before implementing the transactions. So provided it is implemented in the right way, you know HMRC will not apply anti-avoidance rules.

Why would you consider this? Ultimately the tax cost of extracting the assets could be considerable and using a demerger should mean that those tax costs don’t arise.

We have included a case study.

We have designed and implemented many demerger transactions and specialise in this area helping clients with an effective and efficient alternative to the larger accountancy firms. If you are planning to sell your business or are in the process of marketing the business, then contact Craig Simpson or Richard Coombs to discuss your case.

This guidance is generic in nature and does not constitute advice. You should take no action based upon it without consulting ourselves or your own professional advisor.