October 2020

Mergers, demergers and reorganisations

by Peter Miller

The rules surrounding reorganisations of share capital and the transactions that are treated as reorganisations of share capital were part of the very earliest legislation charging tax on capital gains, the short-term gains rules introduced by Finance Act 1962. The majority of those rules are replicated in the latest legislation, TCGA 1992, in a virtually unchanged form. Obviously, the rules as a whole have evolved, but it is clear that these rules have been an important part of the capital gains legislation since its earliest inception.

This Tax Digest aims to be a practical guide to the way in which the rules work, from the simplest reorganisations of a company's share capital through to more complex transactions, such as mergers and demergers. Most provisions are illustrated by examples that should make clear both how the transactions proceed and what the tax consequences are. All the examples are based on real-life experiences from 25 years of being involved in these transactions, and the Digest includes practical advice on such areas as applying for clearance from HMRC and computing the capital gains in complex cases.

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About the author

Pete Miller has over 32 years' experience in tax, covering all aspects of business and corporation tax issues. He was an Inland Revenue Inspector of Taxes from 1988 to 1997, working in Birmingham and London tax districts before moving on to posts in Policy Division and then Technical Division. Pete worked for 11 years in 'Big 4' firms and specialised in advising on major corporate transactions and the corporate tax regimes for intangible assets and substantial shareholdings.

Pete founded The Miller Partnership in 2011 to offer expert advice on all business tax issues to other advisers, particularly lawyers and accountants. Pete's specialist areas are reorganisations and reconstructions, the substantial shareholding exemption, HMRC clearances, the transactions in securities rules, partnerships, taxation of intangible assets and the patent box legislation.

Pete is a regular speaker at conferences and a frequent contributor to books and journals, with over 50 published articles and several Tax Digests. He is a member of the Editorial Boards of Taxation, The Tax Journal and Simon's Taxes, as well as being General Editor of both Whiteman & Sherry on Capital Gains Tax and Whiteman & Sherry on Income Tax. He is co-author, with George Hardy, of Taxation of Company Reorganisations (Bloomsbury Professional, 6th edition, September 2020), and, with Sarah Arnold, of Taxation of Partnerships (CCH, October 2016).

Acknowledgments

Pete would like to thank Lisa Botterill, a partner of Shakespeare Martineau in Leicester, for reviewing and correcting the comments on company law, and Brian Gooch, Tax Technical Director of Shorts Chartered Accountants, Chesterfield, for generally sense-checking the text and spotting most of the typos. Any remaining errors are mine, not theirs!