CTM17260 - Distributions: demergers: clearance procedure and returns

ICTA88/S215 and ICTA88/S216

The legislation provides a clearance procedure. Under this a company which wants to demerge trading activities can obtain advance confirmation from the Board that the distribution that will arise will be an exempt distribution.

Similarly, a company can ask for advance confirmation that a payment it proposes to make will not be a chargeable payment - see CTM17290.

Such transactions usually have tax implications. As a result, the vast majority of cases involve use of the advance clearance procedure.

Clearance applications and the administration of the demerger provisions generally are the responsibility of the Clearance and Counteraction Team, Anti-Avoidance Group. Apart from making reports in certain circumstances, you should only take action on this legislation on advice from Head Office.

Except where otherwise shown below, you should address any correspondence relating to the demerger provisions to

Clearance and Counteraction Team, Anti-Avoidance Group

22 Kingsway

LONDON

WC2B 6NR

Telephone 020 7438 7474.

Fax 020 7438 4409.

Details of how a company makes a clearance application in connection with the demerger legislation is given in SP13/80. The public can obtain copies of SP13/80 from local offices or from the HMRC Internet site.

You should refer all other enquiries relating to this legislation to the Clearance and Counteraction Team, Anti-Avoidance Group. If the enquiry is urgent you should ask the enquirer to telephone the Clearance and Counteraction Team, Anti-Avoidance Group on 020 7438 7474. However if the enquiry relates solely to chargeable gains matters (other than clearances under TCGA92/S138 or TCGA92/S139 (5) you should refer them to CAR Capital Gains Technical Group, referring the applicant to Code of Practice 10 if appropriate.

Return of exempt distribution ICTA88/S216 (1)

Where a company makes an exempt distribution it must make a return within 30 days of making the exempt distribution. The return should be to the local Inspector, give details of the distribution and the reason why it is exempt.

If the demerger is in accordance with transactions for which the Board has given a clearance, the return should simply confirm this.

The Clearance and Counteraction Team, Anti-Avoidance Group will send local offices details of all demergers for which they have given or refused advance clearance. They will do this before the district receives the return under ICTA88/S216 (1).

Return of chargeable payments ICTA88/S216 (2)

The legislation imposes a similar requirement for a return in respect of a chargeable payment (see CTM17290), if a chargeable payment is made within five years of an exempt distribution.

In certain circumstances a company not directly involved in the demerger, or a person other than a company, can make the return.