In some cases the proposed Corporate Restructuring will be relatively straightforward, at least on the surface, potentially involving the acquisition or disposal of business assets or subsidiaries. If one or more trading subsidiaries are to be sold, then the application of the Substantial Shareholding Exemption will need to be considered, together with the management of any associated exit charges on assets leaving the existing corporate group.
More complex Corporate Restructuring projects can take many different various forms and it’s important to understand that a “one size fits all” approach to managing the tax risks is unlikely to be viable. It would be more accurate to say that there’s a patchwork of reliefs available in Restructuring scenarios, none of which affords blanket protection from all tax charges.
This is especially true when it comes to Demergers, whether carried out under the Statutory Demerger code, Section 110 of the Insolvency Act 1986 or via a Capital Reduction in accordance with Companies Act procedures. Whilst some Demerger mechanisms offer attractions over others (for example, the requirement for a company to have sufficient distributable reserves is often cited as a barrier to carrying out a Statutory Demerger), the choice of one mechanism over another doesn’t remove the need to obtain tax clearances. The commercial rationale for the proposed transactions remains all important.
The challenge for any professional adviser is to work through all the major taxes in play ( Corporation Tax, Income Tax, Capital Gains Tax, Stamp Taxes and VAT) to eliminate or minimise unwanted charges and this is where you can call upon our extensive experience in the field of corporate transactions to provide technical support and guidance.