This guidance note gives an overview of the steps and tax implications of a statutory demerger. For an overall introduction to demergers, see the Demergers - overview guidance note.
Where the qualifying conditions are met, statutory demergers enable businesses to demerge in a tax efficient manner without having to liquidate the original company as in a liquidation demerger. In a statutory demerger, the distribution of assets to shareholders is an 'exempt distribution'. Other tax reliefs should reduce or remove other potential tax liabilities. Particular care must be taken where a statutory demerger has been effected that reliefs are not withdrawn as a result of any chargeable payments in the five years following the demerger. This is considered in more detail below.