CTM17260 - Distributions: demergers: clearance procedure and returns


The legislation provides a clearance procedure. Under this a company that wants to demerge trading activities can obtain advance confirmation from HMRC 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, Counter-Avoidance. Apart from making reports in certain circumstances, officers should only take action on this legislation on advice from the Clearance Team.

Except where otherwise shown below, any correspondence relating to the demerger provisions should be sent to

HM Revenue & Customs
Clearance and Counteraction Team, Counter-Avoidance
CTIS Clearance S0528
PO Box 194
Bootle L69 9AA
Telephone 03000 589004.
Fax 03000 589802.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Details of how a company makes a clearance application in connection with the demerger legislation are given in SP13/80. Members of the public can obtain copies of SP13/80 from the HMRC Internet site.

Officers should refer all other enquiries relating to this legislation to the Clearance and Counteraction Team. If the enquiry is urgent the enquirer may telephone the Clearance and Counteraction Team on 03000 589004. However if the enquiry relates solely to chargeable gains matters (other than clearances under TCGA92/S138 or TCGA92/S139 (5)) officers should refer enquirers to Specialist PT (Capital Gains Technical Group), and to Code of Practice 10 if appropriate.

Return of exempt distribution CTA10/S1095

Where a company makes an exempt distribution it must make a return within 30 days of making the exempt distribution. The return is made to an officer of HMRC giving details of the distribution and the reason why it is exempt.

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

HMRC Clearance and Counteraction Team provide details for officers of all demergers where they have given or refused advance clearance. (This text has been withheld because of exemptions in the Freedom of Information Act 2000) 

Return of chargeable payments CTA10/S1096

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.