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CGT treatment on demergers—overview

A demerger takes place when a company (A) transfers either part of its trading activities or shares in a 75% subsidiary (S) to a separate company (B) not belonging to the same group as A¹.

It may be either:

1. Ìý

   (a)ÌýÌýÌýÌý a direct demerger, where A distributes to its members shares in B, or

2. Ìý

   (b)ÌýÌýÌýÌý an indirect demerger, where the trading activities or the shares in S are transferred to B in exchange for the issue by B of its own shares to the members of A²

Where the demerger takes place on or after 1 October 2013, the receipt of B shares on a tax exempt distribution, whether in a direct or indirect demerger, is treated as a receipt of capital³ for trustees of any trust (see I5.1006).

CGT treatment of demergers from 1 October 2013

On a demerger, all trustees are treated in the same way as individuals for CGT purposes⁴.

The demerged shares are