Split your group cleanly, without an unexpected tax bill.

Demerging a group means splitting it so that businesses or assets which sat under one holding company end up in separate ownership chains. Often the same shareholders own two holding companies side by side, one with the trade and one with property or investments. In other cases different shareholders each take a different business. Done properly, with HMRC clearance, a demerger can usually be carried out without immediate tax for the shareholders or the companies.

A sale turns part of the group into cash for someone else. A demerger keeps everything in the family or the existing shareholder group, but in separate structures. It suits shareholders who want to go their own way, owners who want to keep the property while preparing the trade for sale, and families planning succession. It is a reorganisation of ownership, not a disposal to a third party, which is why tax reliefs are available.

Yes. Where two shareholders or families want to run different businesses within the group, a partition demerger can give each of them one business outright, with no cross-shareholdings left behind. The shares are usually reorganised into separate classes first, so each class can receive shares in its own new company. Valuations matter, because each side needs to receive a fair share of the value, and HMRC will expect the commercial reasons to be explained in the clearance application.

Yes, this is one of the most common reasons to demerge. The property company is moved out from under the trading holding company, so the same shareholders own it directly or through a second holding company. A statutory demerger usually won't work for property, because those rules are designed for trading activities, so a capital reduction demerger or a liquidation demerger is normally used. SDLT on any earlier intra-group property transfers needs checking first.

It depends on what is being separated and why. A statutory demerger suits splitting trading businesses where no sale or change of control is planned. A capital reduction demerger is often used to separate property or investments, or where a sale of one side may follow. A liquidation demerger under section 110 of the Insolvency Act 1986 is used where the other routes don't suit. Each has conditions, anti-avoidance rules and company law steps.

A statutory demerger uses rules in the Corporation Tax Act 2010 so that a company can distribute shares in a trading subsidiary, or transfer a trade to a new company, without the shareholders being taxed on an income distribution. The conditions are strict: the companies must be trading, the distribution must benefit the trading activities, and there must be no plan for a sale, a cessation or a change of control afterwards. Payments within five years can also be taxed.

The company reduces its share capital using a special resolution supported by the directors' solvency statement, and uses the reduction to transfer a business or subsidiary to a new company, which issues shares to the shareholders. For shareholders, the reconstruction rules normally mean there is no disposal for capital gains tax. For the company, the transfer can be at no gain and no loss. Since 26 November 2025 both reliefs are subject to a main purpose test.

A section 110 demerger puts the company into a members' voluntary liquidation. The liquidator transfers its businesses or assets to new companies, which issue shares directly to the shareholders. It is often used where a capital reduction isn't practical, or where several businesses are being divided between different shareholders. The directors must make a statutory declaration of solvency, and the costs and timetable of a liquidation are usually greater than other routes.

A new holding company is often inserted at the top first, through a share-for-share exchange. This puts the share capital and reserves needed for the split in the right company, lets the group be divided cleanly at the top, and avoids disturbing the trading company itself. The share exchange has its own clearance and stamp duty points, and the order of the steps, and how they are described to HMRC, needs care under the new main purpose test.

It depends on the route. A statutory demerger normally needs clearance under section 1091 CTA 2010. Reconstructions rely on section 138 TCGA 1992 for the shareholders and section 139 for transfers of a business between companies. Section 701 ITA 2007 deals with transactions in securities for income tax. These can all go in one application to HMRC's Clearance and Counteraction Team, which responds within 30 days of a complete application.

A straightforward demerger often takes a few months. The planning and valuations come first, then the clearance application, which HMRC aim to answer within 30 days, or within 30 days of answering any further questions. After that come the legal steps, the stamp duty adjudication and the filings. Where property, lenders, landlords or third-party consents are involved, the timetable is usually set by those rather than by HMRC.

Sometimes. Share exchanges and transfers of shares to new companies can qualify for stamp duty reliefs under sections 75 and 77 of the Finance Act 1986, which still require bona fide commercial reasons and need HMRC adjudication. Where a demerger splits shareholders so that holdings no longer mirror each other, section 75 relief may not be available. A dividend declared directly in shares normally carries no stamp duty because there is no consideration.

It can. If property was moved between group companies using SDLT group relief in the last three years, and the company holding it leaves the group in the demerger, the relief is normally clawed back on the property's market value. New transfers of land can also be charged, with reconstruction or acquisition relief available in some cases. In Scotland and Wales the equivalent reliefs sit in LBTT and LTT. The property history should be mapped before choosing a route.

A degrouping charge arises when a company leaves a capital gains group within six years of receiving an asset from another group company at no gain and no loss. It treats the asset as sold and reacquired at market value at the time of the earlier transfer. It does not apply where a company leaves a group only because of a statutory demerger distribution, but other routes need checking, especially where property has moved within the group.

Not usually, where the conditions are met. The reorganisation and reconstruction rules treat the shareholders' new shares as standing in the shoes of their old ones, so there is no disposal on the demerger itself. Their base cost is split between the companies, for unquoted shares by reference to market values when they later sell. A gain is taxed only when the shares are eventually sold, which is why the structure afterwards matters.

Possibly, but timing and route are critical. A statutory demerger isn't available where there are arrangements for a sale or change of control afterwards. A capital reduction or liquidation demerger can be used where a later sale is planned, but every step must be explained to HMRC. HMRC's guidance says a restructure so a later sale qualifies for a relief is not caught where the conditions are then met throughout the relevant period.

It can help or hinder. The two-year ownership period normally carries over where new shares are treated as the same as the old ones, so the shareholders don't start again. But each company must now qualify on its own: a trading company's shares can qualify, while a company mainly holding property or investments usually won't. Separating the two can make the trading shares' position cleaner, and it is worth modelling before the split.

Our sister site Demerger Tax, at demergertax.co.uk, covers every demerger route in depth, including partition demergers, capital reduction demergers, liquidation demergers, statutory demergers and the tax on each. It is run by the same team, so the advice is joined up whether your demerger starts with a holding company question or a wider restructure. We can look at your group and tell you which route is likely to fit.