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?