Home > Projects > Business Tax > Company Demerger and Buy-Out

The Problem

Two director shareholders of a successful trading group decided to go separate ways after they disagreed about how the business should continue.

Within the corporate group was a commercial property from which the main trading company operated and paid rent.

The directors agreed that one party should buy the other out, however the exiting director insisted on retaining his full interest in the commercial property.

The directors were therefore worried about the significant negative tax implications of extracting the rental property directly from the group structure.

The Solution

Following discussion with the shareholders, we created a bespoke plan to demerge the group into its trading and rental activities before allowing the exiting director to be bought out from the trading activities.

We then prepared a detailed claim for advance clearance from HMRC to confirm they wouldn’t seek to counteract the proposed restructure and buy-out with anti-avoidance legislation.

 

The Result

HMRC duly granted clearance allowing the proposed restructure and buy-out to go ahead as planned.

Overall the plan successfully saved SDLT charges of up to £19,500 and the potential for HMRC to claim that there had been a distribution of the property.