Base cost uplift on a Capital Reduction Demerger

How can a base cost uplift be achieved on a capital reduction demerger?

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A client is looking to split their property rental business into two so that each group of shareholders can manage their respective portfolios.

They have been advised that any properties demerged from their property company will receive an 'incidental tax-free uplift in base cost for corporation tax purposes, such that there will be minimal corporation tax payable if the demerged properties are disposed of post-demerger'.

I'm struggling to get my head around this as my understanding was that any properties transferred within a group would usually inherit the base cost (NGNL transfer), so I don't understand how a base-cost uplift can be achieved, perhaps my understanding is a bit shallow and would be grateful if anyone can enlighten me.

Thank you 

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Replying to Justin Bryant:
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By HappyClappyAccountant
24th May 2024 14:27

Thank you, this is very helpful.

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By Taxguy96
24th May 2024 12:18

Essentially your transer properties intragroup, which are transferred NGNL but then the demerger creates a degrouping charge, the degrouping charge is then sheltered by the various demerger reliefs hence a rebasing occurs.

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Replying to Taxguy96:
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By HappyClappyAccountant
24th May 2024 14:27

Thank you this is helpful

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