We are helping Accountants with clients who are looking to demerge a business using Section 110 of the Insolvency Act 1986.
Example scenarios
The reason for doing this includes:
- To separate 2 or more businesses (e.g. a trading business and property business) in the same company if one business is to be sold and the other retained
- To separate connected companies – e.g. to remove a loss making part of the business
- To redistribute shares – e.g. where two directors have shares in both Company A and Company B; and they want one director to just have shares in Company A and the other just in Company B
We are able to find structures which may entirely mitigate corporation tax, income tax, capital gains tax, stamp duty or stamp duty land tax on the reconstruction.
As with reinstating a dissolved company to realise assets, we would do the MVL aspect with a solicitor doing the necessary legals.
The Benefits
The main reasons for using this process are:
- the opportunity to restructure businesses and shareholdings tax free
- allowing selling shareholders to benefit from Entrepreneurs’ Relief (cgt @ 10%) on a sale
- HMRC clearance available for much of the tax restructuring.
