I am aware that a statutory demerger can involve transferring assets of the demerged trade to a new company in exchange for shares to some or all of the existing shareholders and this involves paying a dividend in specie ,hence why there has to be sufficient distributable reserves.
For income tax purposes the shareholders will of course be relying that the transfer of assets is an exempt distribution under s1077 CTA 2010. If the distribution becomes taxable (say if a shareholder receives a chargeable payment from one of the companies within 5 years s1086), what is the quantum that is subject to income tax? s1086 says "The amount or value of the payment is chargeable".
From the distributing company's perspective, the quantum of the distribution is governed by s845 Companies Act 2006, which usually treats the book value per the accounts as the amount. Let's say we have internally generated goodwill that is distributed to NewCo. The value of dividend in specie is nil as far as the distributing company is concerned. What is the value as far as the shareholder is concerned? Market value? If so, under what authority?
Further, what values should be recorded in the accounts of NewCo for the demerged trade? Dr. Assets, Cr share capital at market value?
In summary my questions are:
1. What is the quantum of a dividend in specie for a shareholder in the event that an exempt distribution becomes chargeable? Is this the market value of the assets distributed, the amount of chargeable payment, or the book value of the assets?
2. What are the bookkeeping entries for the distribution to NewCo and are these at market value?
- VAT training 303 4
- Mixing up NI numbers under RTI 273 7
- Buying a company for £20,000 from owner how it works? 600 9
- 31st october deadline 372 6
- Property gift to sister 168 4
- RTI Late Registration query 146 1
- Treatment of one-off payments to non-employees 248 2
- Payroll software 171 1
- Who gets the CGT deduction 238 2
- Accounting for display stands 263 7
- Companies House Search 307 3
- Letter saying client is IR35 compliant 299 3
- Is it any of my business ? 1,517 15
- VAT Flat Rate Scheme 324 3
- A Friday Funny. 352 5
- Something for the weekend? 325 5
- Moneysoft Payroll 569 12
- Practicing without a Practicing Certificate 1,252 19
- How much do you charge for Accountant's Reference? 2,544 26
- Coming out of flat rate 163 1
- NHS finance professionals 710
- Auto Enrolment and Foreign employers 429
- Foreign Pension Contribution 402
- Pre Season Invoice dated September how do you treat the VAT as not due until May 16 387
- Employee's statement of sickness (SC2) form - no longer available as downloadable pdf 384
- SWAT AML v Anti Money Laundering Compliance Plus (AMLCP) 338
- Does pension term assurance count for unused relief purposes? 302
- Management reporting dashboards and cloud accounting 279
- IFA income recognition & reporting 224
- Incorporating doctors 219