Introducing demergers
Omar Aswat - Chartered Tax Advisor
Founder: ASWATAX / ASWATGlobal. I provide bespoke tax advice and creative solutions for business owners and property landlords! ?? I can also help you set up in the UAE and KSA.
There are three main types of demergers:
? Statutory
? Capital reduction
? Liquidation
All have their own uses and benefits.
When do demergers need to be considered?
? before a decision to sell a business – in preparation to maximise the eventual sale whilst also ensuring least tax leakage
? when selling a company – splitting off trades or investments that are not required by the purchaser such as a commercial or even perhaps residential properties
? in the event of a shareholder dispute – allowing shareholder groups or family members to find a way forward
? when a family outgrows its family-owned investment company – splitting the original company into a more appropriate structure
? to separate out multiple trades within a single entity – recognising the need for trade specific management incentives or perhaps an external investor is only interested in one of the trades
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? to protect the tax status of a trading company or group – protecting valuable releifs such as Business Asset Disposal Relied for capital gains tax and Business Property Relief for inheritance tax which are dependent on the trading status of a business
If any of the above points sound relevant, I urge you to talk to me without obligation as soon as possible. Planning ahead will make a significant difference to your final decision and to your tax bill.
Which type of demerger your business needs to undertake (IF to begin with) will form part of our premilinary advice.
Sometimes, not undertaking a demerger can become a costly mistake. And it must be done correctly otherwise we're back to square one and perhaps further tax charges on the shareholders - this is the worst case scenario!
Hope you found the above useful and insightful.
Omar Aswat