Client has a Limited Company with a Freehold Property and a Trade. Client wishes to transfer the Trade into a NewCo, leaving the property in OldCo. I am thinking of using the relief "scheme of reconstruction' as defined by TCGA 1992, s 136, Sch 5AA" to enable this split and avoid unnecessary CGT/CT and SDLT issues. The shareholders of both companies will be identical.
Does anybody have any thoughts on this or an alternative suggestion?
Replies (3)
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Is the trade valuable?
I take it you're proposing to transfer the trade to a stand alone company under the same ownership?
There will be no CGT or stamp tax consequence, but you will have a distribution (of the trade and its assets, including goodwill) to which the demerger relief provisions will not apply.
To get the effect you want requires a members voluntary liquidation.
What is the purpose of separating the property from the trade?
Purpose
I agree with Steve's comments - a s110 Insolvency Act demrger is likely to be the way forward.
Is the property the trading premises of the business or an investment property? Either way splitting it out now is likely to have adverse IHT consequences and there may be other issues.